Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BARRY CORPORATION BILL [Lords]

[Queen's Consent, on behalf of the Crown, signified]

Bill read the Third time and passed, with Amendments.

BRIGHTON CORPORATION BILL

Read the Third time and passed.

EXETER CORPORATION BILL [Lords]

Read the Third time and passed, with Amendments.

MERSEY DOCKS AND HARBOUR BOARD (SEAFORTH WORKS) BILL [Lords]

As amended, considered ; to be read the Third time.

WHITLEY BAY PIER BILL [Lords]

Read a Second time and committed.

TEES VALLEY AND CLEVELAND WATER BILL (By Order)

Consideration, as amended, deferred till Thursday at Seven o'clock.

Oral Answers to Questions — RHODESIA

Talks

Mr. Wall: asked the Secretary of State for Commonwealth Relations if he will make a statement on the re-commencement of talks between British and Rhodesian civil servants.

The Secretary of State for Commonwealth Relations (Mr. Arthur Bottomley): Our review of all aspects of the Rhodesia problem, to which my right

hon. Friend the Prime Minister referred in his statement of 5th July, has not yet reached the stage when the talks can be resumed. There will therefore be some delay beyond the end of this month, but the talks will be taken up again as soon as possible. My right hon. Friend has undertaken to make a further statement before the Summer Recess.

Mr. Wall: Is the right hon. Gentleman aware that there are now only five days left in which to fulfil the Prime Minister's undertaking on 5th July that the talks would be resumed later this month? When they are resumed, can he say at what level they will be resumed?

Mr. Bottomley: I must ask the hon. Gentleman to await the further statement by the Prime Minister to which I have referred.

Mr. Paget: Is my right hon. Friend aware that the Rhodesia confrontation, in its direct and indirect results, is costing us over £100 million a year? Can we go on affording it?

Mr. Bottomley: That is a different question.

Mr. Sandys: Can the Secretary of State assure us that his reply today does not in any way mean that there is any doubt that the talks will be resumed?

Mr. Bottomley: Yes, Sir.

Mr. Hamling: asked the Secretary of State for Commonwealth Relations whether he will publish a White Paper on the informal talks between Her Majesty's Government and the illegal regime in Rhodesia.

Mr. Bottomley: No, Sir. The content of the talks remains confidential.

Mr. Hamling: Will my right hon. Friend deny the report that Her Majesty's Government might recognise Ian Smith as Prime Minister of Rhodesia under a new constitution, still without majority rule?

Mr. Bottomley: As I said before, exploratory talks are being held to see whether it is possible to conduct negotiations. That is still the position.

Sir Knox Cunningham: Might it not help with these talks if, following Zambia's decision to ship copper by rail,


there were to be some relaxation of sanctions?

Mr. Boftomley: No, Sir. I do not think that that would help at all.

Mr. Fisher: asked the Secretary of State for Commonwealth Relations if he will give an assurance that he will not conclude any settlement of the Rhodesian problem while Parliament is in recess and without giving the House an opportunity to debate it.

Mr. Bottomley: As has repeatedly been made clear, any final settlement of the Rhodesian problem must receive the approval of the British Parliament.

Mr. Fisher: Will the right hon. Gentleman bear in mind that any settlement of the Rhodesian problem is unfortunately bound to be highly controversial within the Commonwealth, and might even lead to the break up of the Commonwealth, so that the House really ought to have an opportunity to debate it?

Mr. Bottomley: As I have said before, the talks are informal. There can be no question of a settlement before there is a lawful Government in Rhodesia.

Mr. John Lee: Will my right hon. Friend give an assurance that, if some kind of agreement is reached during the recess, Parliament will he recalled to discuss it?

Mr. Boftomley: That is a matter for my right hon. Friend the Leader of the House.

Mr. Lubbock: Will the right hon. Gentleman make a statement before the House rises so that we may be fully informed of the latest progress?

Mr. Bottomley: My right hon. Friend the Prime Minister intends to do so.

Zambia (Broadcasts)

Mr. Wall: asked the Secretary of State for Commonwealth Relations what complaints he has received from Mr. Smith's Government about broadcasts from Zambia advocating arson and murder ; and what reply he has made.

The Minister of State, Commonwealth Relations Office (Mrs. Judith Hart): The illegal authorities in Rhodesia have no right of complaint to Her Majesty's Government in such matters other than as

private citizens. No such complaints have been received.

Mr. Wall: I am surprised at that reply. Is the hon. Lady aware that hon. Members on both sides have received these complaints? Would she not agree that it is unfortunate that the Zambian broadcasts are supervised by a British subject who was a member of the staff of the Central Office of Information?

Mrs. Hart: The hon. Gentleman may have received complaints. I can only report that Her Majesty's Government have not. It is my information that no extreme broadcasts are being made from Zambia to Rhodesia at the present time.

Mr. Winnick: Is my hon. Friend aware that although we all deplore murder, arson, and all the rest, as long as Africans in Rhodesia are denied their elementary human rights it will be very easy to encourage them to think that the only road is through violent means?

Mrs. Hart: I think that my hon. Friend will recognise that there may be a certain inevitability about some things that occur in Africa, but that does not mean that the British Government would in any way wish to encourage them.

Mr. Hastings: Nevertheless, would the hon. Lady condemn this practice in principle and unequivocally?

Mrs. Hart: What the Zambian Radio puts out is a matter for the Zambian Government. I have already said that no extreme bro-adcasts are now taking place and in the past there have been only a few. I think, therefore, that the hon. Members' question is irrelevant.

Mr. Evelyn King: asked the Secretary of State for Commonwealth Relations if, pursuant to Article 14(v) of the Licence and Agreement, he will instruct the British Broadcasting Corporation regularly to monitor programmes going out from Zambia to Rhodesia ; and if he will arrange for copies of excepts which incite to violence to be placed in the Library of the House.

Mrs. Hart: No, Sir. My information is that there have been no recent broadcasts from Zambia to Rhodesia of the type which the hon. Gentleman seems to have in mind.

Oral Answers to Questions — MALAWI

Civil Servants

Mr. Braine: asked the Secretary of State for Commonwealth Relations what action he will take to ensure equitable treatment to members of Her Majesty's Overseas Civil Service who transferred from Nyasaland Government service to that of the Federal Government, on the promise that their careers would be assured, and who after the dissolution of the Federation accepted employment in Malawi under conditions inferior to those currently offered by the Malawi Government to officers recruited directly in Great Britain under arrangements subsidised by the British taxpayer.

Mr. Longden: asked the Secretary of State for Commonwealth Relations, if he will make representations to the Government of Malawi to compensate more adequately those members of Her Majesty's Overseas Civil Service who were transferred from the service of the Nyasaland Government to that of the Federal Government, and who, on the dissolution of the Federation, re-entered the employment of the Government of Malawi and what were the recommendations of the Curtis Committee in respect of these civil servants.

Mr. Bottomley: On the question of terminal arrangements for members of the Federal Public Service, I have nothing to add to the reply my hon. Friend gave to the hon. Member for Hertfordshire, South West (Mr. Longden) on the 14th June. Any question concerning current terms of service is a matter for my right hon. Friend the Minister of Overseas Development. The Curtis Committee was an official working party appointed by the Governments concerned and its reports were not published.

Mr. Braine: Is the Commonwealth Secretary aware that the officers concerned were not permitted to remain in the Colonial Service when their departments were transferred to the Federal Government but when the Federation was dissolved they were either dismissed without compensation or returned to Malawi to work under conditions inferior to other British expatriate officers? Is not this an unsatisfactory state of affairs, and in

honour will the right hon. Gentleman do something about it?

Mr. Bottomley: When these servants elected to join the Federal service they did so in the knowledge that they would end their service with Her Majesty's Government Overseas Civil Service. The pensionable members of the Federal service were given the option to join one of the territorial public services or to retire on pension. If comparable pensionable employment was not available they received compensation. Those who chose to join the public service in Nyasaland did so on contract terms and have received their enhanced pensions concurrently with their other salaries.

Mr. Longden: Is it not the case that when the Federal Government was formed these people were urged to enter this service and they were assured that their careers would not suffer if they did so, yet when the Federation was dissolved that promise was not honoured?

Mr. Bottomley: There is something which ought to be looked into, I agree with the hon. Member, and I understand that my right hon. Friend the Minister for Overseas Development has recently considered with the Malawi Government the current terms of service of some of these officers and new arrangements are being made.

Oral Answers to Questions — AUSTRALIA AND NEW ZEALAND

Low-Cost Charter Flights

Mrs. Braddock: asked the Secretary of State for Commonwealth Relations what results he has achieved, following consultations with the Governments of Australia and New Zealand, in seeking to arrange low-cost charter flights for members of the Australia and New Zealand Parents and Relatives Association, who wish to visit their families who have emigrated to Australia and New Zealand.

Mr. Bottomley: The question of the fares to be charged on charter flights to Australia and New Zealand is entirely a matter for decision by the Governments of Australia and New Zealand.
I understand that the New Zealand Government are prepared to consider individual applications for charter flights


the Australian Government have been unable to agree to such flights with fares at the low levels so far proposed.

Mrs. Braddock: Will my right hon. Friend pursue this matter, because in this country there are very many parents and other relatives of people who have emigrated to Australia and New Zealand who have never seen their people since, although arrangements could be made for them to do so? Arrangements are made with Canada and America for cheap flights. Would my right hon. Friend pursue the matter with the Australian and New Zealand Governments to see if it is possible to do anything on those lines? If that is not possible, will he see whether some arrangement could be made with a British flying company for charter flights? I am certain that they would not lose by doing that.

Mr. Bottomley: As my hon. Friend knows, I am most anxious to help. I have been in touch with the Australian and New Zealand Governments. I am sure that they are fully aware of the considerations involved.

Oral Answers to Questions — GHANA

Military Equipment

Mr. Tilney: asked the Secretary of State for Commonwealth Relations what help he has given to the new Ghana Government in the provision of uniforms, webbing equipment, and spare parts for military vehicles.

Sir G. de Freitas: asked the Secretary of State for Commonwealth Relations whether he will give to the Ghana Government such military equipment surplus to the needs of the Territorial Army as is necessary to maintain the Ghana Army at the standard which it reached at the time of Ghanaian independence.

Mr. Bottomley: We are anxious to give the Ghana Government any help we can, and have considered carefully and with much sympathy their request for help in providing military equipment. We have, however, come to the conclusion that, owing to the overriding need for economy in all forms of Government expenditure, we are unable to comply with it. General

Ankrah has been informed accordingly by our High Commissioner, and I am informed that the Ghana Army has now made arrangements to obtain most of these supplies from elsewhere.

Mr. Tilney: Considering that the Territorial Army is being reduced to virtually half and that 19 Territorial armoured regiments are being reduced to one in an armoured role, surely some spares and some equipment could be made available?

Mr. Bottomley: That may be so, but the cost involved has to be met from somewhere and this additional expenditure would fall on the British Government.

Sir G. de Freitas: Will my right hon. Friend reconsider this and, in any reconsideration, will he remember that my Question refers to the level of arms and equipment of the Ghana Army 10 years ago and not to any increase in the power of the army?

Mr. Bottomley: No, I am afraid that, as I have said, in view of the present economic situation there is no opportunity for me to review the matter.

Sir F. Bennett: May we have further clarification? If some of this equipment which is required is surplus to requirements, what possible cost across the exchanges would be involved? Is it not a matter of simply running down the stocks in this country?

Mr. Bottomley: The problem no longer exists. The Ghana Government themselves have taken the opportunity of getting the supplies they want in this respect locally.

Oral Answers to Questions — GIBRALTAR

Emigration to Canada and Australia

Sir W. Teeling: asked the Secretary of State for Commonwealth Relations if he will, in order to help those Gibraltarians who wish to emigrate to Canada or Australia, make representations to the Canadian and Australian Governments not to insist that Gibraltarians wishing to emigrate must go to Canadian and Australian Government offices in Madrid, as Gibraltarians are then treated as coming from Spain, and


as some Gibraltarians are not allowed to enter Spain.

Mr. Hart: I understand that there is very little interest in emigration from Gibraltar, but I am prepared to arrange for this point to be discussed with the appropriate Canadian and Australian authorities.

Sir W. Teeling: Now that the hon. Lady and the right hon. Gentleman are about to take over Gibraltar, will they concentrate very much on this because many people in Gibraltar are hard up and poor and cannot come to England to have themselves medically examined in order to go to Canada or Australia? Will they ask the Australian and Canadian Governments to send people from Madrid to Gibraltar, say, once a month, to study and examine the problems of those people who want to emigrate?

Mrs. Hart: I suppose that this is the kind of point which will emerge during discussions with the Australian and Canadian authorities.

Oral Answers to Questions — COMMONWEALTH RELATIONS

European Economic Community

Mr. Henig: asked the Secretary of State for Commonwealth Relations which Commonwealth countries have since January, 1963, notified Her Majesty's Government of their intention to negotiate trade or association agreements with the European Economic Community.

Mrs. Hart: Since January, 1963, Nigeria, Kenya, Uganda and Tanzania have entered into negotiations with the European Economic Community for association agreements.

Mr. Henig: Could my hon. Friend tell me what undertaking those countries have given to keep the United Kingdom fully informed of the progress of these negotiations and to consult with Her Majesty's Government before signing any agreements with the E.E.C.?

Mrs. Hart: I am sure my hon. Friend will understand that I cannot disclose information which reaches us confidentially from other Commonwealth Governments, but I can assure him that there is a great deal of discussion and we are kept fully informed.

Mr. Henig: asked the Secretary of State for Commonwealth Relations whether he will make a statement on the Government's policy towards Article 3 and Protocol 2 of the Nigeria-European Economic Community Association agreement, signed on Saturday, 16th July, in view of the fact that these clauses grant the European Economic Community trading concessions denied to this country.

Mrs. Hart: The British Government have frequently stated that, in their view, developed countries which grant new preferential treatment to developing countries should not demand concessions in return from the latter. Nevertheless, the Agreement provides that Nigeria shall grant certain preferences to the European Economic Community. The British Government recognise however, that the Community offers a large market for some Nigeria products.

Mr. Henig: As Nigeria grants no Imperial Preference at all to this country, may I ask whether Her Majesty's Government will now ask Nigeria to give us at least most-favoured-nation treatment in view of the fact that the NigeriaE.E.C. Association agreement is most unlikely to be accepted as a Customs union or free trade area within Article 24 of the G.A.T.T.?

Mrs. Hart: That would require consideration at meetings of the G.A.T.T. I cannot say at this stage whether we would think it right to take any action on the lines suggested by my hon. Friend.

Oral Answers to Questions — TANZANIA

Diplomatic Relations

Mr. Fisher: asked the Secretary of State for Commonwealth Relations whether he will take an initiative designed to bring about the resumption of diplomatic relations between Great Britain and Tanzania.

Mr. Bottomley: The hon. Member will recognise that we normally look to the country which has been instrumental in breaking diplomatic relations to take any such initiative.

Mr. Fisher: Of course I appreciate that, but is the right hon. Gentleman aware that reports from those who have


been in Tanzania in the recent past have indicated that President Nyerere would now very much like to resume diplomatic relations with us? If so, in view of the importance of our being fully in the picture of East African opinion at present, would the Commonwealth Secretary himself try to devise a mutually satisfactory and acceptable formula?

Mr. Bottomley: I have said that we would normally look to the country which has broken off relations to take the first step. As my right hon. Friend the Prime Minister said in this House on 27th January, this has been a very serious mistake by the Tanzanians but one which is reparable.

Sir H. Legge-Bourke: In view of the grave state of our own economy, would the right hon. Gentleman make clear to any self-governing former colonial territory of this country that they cannot continue to expect aid of the proportions which Tanzania is now getting?

Mr. Bottomley: No, Sir. I think it would be very unwise to do that.

Oral Answers to Questions — ZAMBIA

Minister of State (Talks)

Mr. James Johnson: asked the Secretary of State for Commonwealth Relations if he will make a statement regarding the talks between the Minister of State and the Zambia Government upon her visit to Lusaka.

Mrs. Hart: I would refer the hon. Member to the reply which my right hon. Friend gave on 5th July to the hon. Member for Haltemprice (Mr. Wall), to which I have nothing to add.

Mr. Johnson: Is my hon. Friend aware that, despite her valuable visit, there has been a steady worsening of the political climate in Lusaka? Will she state categorically that no independence will be given to Rhodesia before there is majority rule by Africans in that territory?

Mrs. Hart: My hon. Friend will recognise—as he has, indeed, done by what he has said—that there is a considerable area of political disagreement between ourselves and Zambia, stretching back to the events immediately following U.D.I. He will also recognise that it would be

unwise for the British Government, in advance of any further consideration of this matter, to give the kind of assurance he has asked for.

Mr. Sandys: Since I understand that the Minister of State discussed with the Zambian Government the use of the Rhodesian Railways, may I ask whether, now that Zambia has decided to resume the dispatch of copper over the Rhodesian Railways on condition that the purchasers pay the freight, Her Majesty's Government will allow British purchasers to make these payments?

Mrs. Hart: That raises a different question.

Mr. Faulds: Is my hon. Friend aware that, during this last week, I have been fortunate enough to have talks with President Kaunda and the Foreign Minister Mr. Kapwepwe and that they are both deeply disturbed by what they consider the British Government's deception in the matter of sanctions and by the British Government's lack of zeal in finishing off the Smith regime? Is she further aware that it is this which will lead to Zambia quitting the Commonwealth?

Mrs. Hart: If Zambia were to leave the Commonwealth that would be a most regrettable and serious situation not only for Zambia and Britain but for the Commonwealth as well. I hope that it can be avoided. I have had with President Kaunda and certainly with Mr. Kapwepwe frequent and full discussions about the sanctions policy and we are in no doubt about each other's point of view and the precise areas on which I would strongly disagree with some of Mr. Kapwepwe's assertions.

Assistance

Mr. Colin Jackson: asked the Secretary of State for Commonwealth Relations if he will make a statement on current British plans to help Zambia in connection with financial losses incurred by the continuing unconstitutional position in Rhodesia.

Mrs. Hart: The question of assistance to Zambia is still under consideration following my return from my recent discussions with the Zambian Government in Lusaka.

Mr. Jackson: Can my hon. Friend give an idea of the gap between what we are


prepared to offer the Zambian Government and the amount that President Kaunda considers necessary, bearing in mind the losses he has suffered because of the illegal régime in Rhodesia?

Mrs. Hart: This is not a matter to be measured so much in terms of money but in terms of what is required for the development of alternative routes for Zambia in order to enable her to intensify sanctions against Rhodesia. There are immensely complicated technical problems and it is because of these that the matter is still under consideration.

Mr. Peel: Will the hon. Lady bear in mind, in considering assistance to Zambia, that the Government of Zambia have recently sacked a number of British police officers without adequate notice or adequate compensation?

Mrs. Hart: A great many factors have to be borne in mind in considering all the questions relating to Zambia and the sanctions policy. That is one of them. The Zambians have a point of view that one well understands but nevertheless one is able to identify positive areas on which one would not wholly agree. Every factor is being borne in mind.

Sir C. Osborne: Will the hon. Lady make it clear that, since we are living on American loans, we have no right to give to these African countries aid that comes to us from countries which have not agreed to such use? Will she make it clear that there is a limit to what we can do?

Mrs. Hart: Of course there have to be limits. Nevertheless, the hon. Gentleman overlooks the fact that, in order to achieve a satisfactory solution to the Rhodesian problem—a solution which would satisfy the majority of hon. Members of this House—it is necessary to enable the sanctions policy to work really effectively. That is the point at which Zambian participation can be of the most tremendous importance.

Oral Answers to Questions — PAKISTAN AND INDIA

Secretary of State (Visit)

Mr. Colin Jackson: asked the Secretary of State for Commonwealth Relations when he proposes to visit Pakistan and India.

Mr. Bottomley: I have no immediate plans for visiting either country but greatly hope that, subject to the convenience of the Governments concerned, I may have the opportunity to do so before too long.

Mr. Jackson: Will my right hon. Friend remember that many sympathetic voices in New Delhi feel that, after his visits to Africa, Canada, Australia and Malaysia, it is about time India had a visit from a representative of Her Majesty's Government?

Mr. Bottomley: There have been other visitors from Her Majesty's Government. Lord Walston was there recently. I have been fortunate enough to have had meetings with many Indian and Pakistan Ministers during recent weeks.

Mr. Arnold Shaw: Is my right hon. Friend aware that it is important that he should take the earliest opportunity to improve relations with the Ministers of India and Pakistan?

Mr. Bottomley: This is a matter best left to both of them. We can only encourage where it is possible to do so.

Oral Answers to Questions — MINISTRY OF POWER

National Coal Board (Diversification Projects)

Mr. Patrick Jenkin: asked the Minister of Power what steps Her Majesty's Government has now taken, pursuant to recommendation 69(v) of the Twelfth Report of the National Board for Prices and Incomes, to assume greater responsibility for identifying and critically examining the assumptions on which the forecast of yield on new investment by the National Coal Board in diversification projects is based.

The Minister of Power (Mr. Richard Marsh): This is being pursued in the course of this year's review of the National Coal Board's investment programme.

Mr. Jenkin: Would not the right hon. Gentleman recognise that three months ago to this date he admitted that he regarded this matter as of great importance which must be pursued as fast as possible? Is it not regrettable that 20 years after its formation the National Coal


Board should still have to be told by the Government how to appraise its capital investment? What is to happen with the steel industry 20 years from now?

Mr. Marsh: The steel industry will be a great deal more efficient than now. Under the Coal Industry Nationalisation Act, 1946, the responsibility of the Minister relates to the general lines of the National Coal Board's programme of reorganisation and development. Despite this it is the practice for the Government to keep the procedures within the industry under regular review.

Collieries (Manpower)

Mr. Dickens: asked the Minister of Power if he will state the number and location, by National Coal Board divisions, of profitable collieries rendered unprofitable as a consequence of manpower shortage in the year ended 26th March, 1966.

The Parliamentary Secretary to the Ministry of Power (Dr. Jeremy Bray): The manpower shortage has affected adversely the profitability of a large number of pits, but I am informed by the Board that information is not available in the form requested.

Mr. Dickens: Is my hon. Friend aware that his reply is most unsatisfactory? Is he further aware that the argument advanced by the Government about there being a hard core of viable pits is now running very thin? Is it not the case that the manpower shortage in the East Midlands, the West Midlands and Yorkshire has been greatly accelerated by the speeded-up colliery closures programme?

Dr. Bray: My hon. Friend will be glad to hear that the reduction in manpower in the last eight weeks has been about 12½ per cent. less than in the same period last year. We all hope that this hopeful trend will continue.

Petroleum Gas

Earl of Dalkeith asked the: Minister of Power (1) what information he has about the development of petroleum gas for use by the Scottish Gas Board; when such gas will be supplied to domestic consumers; and what reduction

in Scottish coal requirements this will involve annually when in peak production; and

(2) what effect he estimates the wider use of petroleum gas will have on reducing the cost of gas supplied to domestic consumers in Scotland.

Dr. Bray: The extension of supplies to Scotland and other parts of the country not at present connected to the existing natural gas line is being examined as part of the studies in hand on the utilisation of gas from the North Sea. Until these have been completed and more is known about the availability of North Sea gas, it is not possible to say how other fuels or the cost of gas supplies in Scotland would be affected.

Earl of Dalkeith: Is it not the case that experiments are being carried out in the use of petroleum gas? If natural gas and/or petroleum gas is brought into use can the hon. Gentleman say what effect on employment in Scottish mines it will have?

Dr. Bray: I apologise for any confusion in the reply. Natural gas is petroleum gas. I thought that the hon. Member was referring to liquefied petroleum gas which is sold by some gas boards. It is sold in Scotland and presumably increased supplies are possible.

Electricity (Charges)

Mr. Hooley: asked the Minister of Power whether he will give a general direction, in the public interest, to electricity boards to consult him before making agreements to supply current to private industry below the average price per unit paid to the Central Electricity Generating Board.

Mr. Marsh: No, Sir. The costs of supplying electricity vary with the pattern of consumption, and Boards should remain free to reflect this variation in the prices charged.

Mr. Hooley: Is my right hon. Friend aware that a public quarrel has broken out between the electricity board and a major industrial consumer? Would it not be in the public interest that there should be some considered public policy on the price for bulk supplies which may have implications on the capital programmes of the electricity industry?

Mr. Marsh: The new structure of the bulk supply tariff will encourage a better relationship between costs and prices. In the past, rebates given for restrictable supplies may have been, to put it no higher, excessive in relation to the cost of capacity for meeting peak loads.

Mr. Michael Posner

Mr. Palmer: asked the Minister of Power what duties are to be allocated to Mr. Michael Posner; and if he is to be appointed a member of the Minister's Energy Advisory Committee.

Mr. Marsh: Mr. Michael Posner is expected to take up full-time duties as Director of Economics on 1st October, subject to securing release from his university; meanwhile he is giving the Ministry assistance and advice on an ad hoc basis. He will be responsible for inquiring into, and advising on, economic questions of concern to the Ministry, including those of fuel policy and co-ordination which come before my Energy Advisory Council.

Mr. Palmer: Does my right hon. Friend think that this kind of temporary advice, with all respect to Mr. Posner, is good enough? Does not the importance of the decisions now being made about fuel and power make it necessary that my right hon. Friend should have available the very best all-round expert advice?

Mr. Marsh: I think that my hon. Friend misunderstands the position. Mr. Posner is coming to work for the Ministry full time to head a division which will be composed of a number of people who will also be working full time on just this subject. The Ministry is concerned with two considerations—one is the short-term fuel policy to take account of some of our immediate problems, and the other is the much longer exercise to produce some form of econometric model of the fuel economy.

Electrical Power Generation (Natural Gas)

Mr. Palmer: asked the Minister of Power if he will make a statement on the application of the Central Electricity Generating Board to use natural gas for electrical power generation and the probable effect on the coal

industry and the nuclear power programme.

Mr. Marsh: I have had no such application, and would refer my hon. Friend to the reply I gave to a supplementary question by the hon. Member for Barkston Ash (Mr. Alison) on 21st June.

Mr. Palmer: In that case, does not my right hon. Friend agree that it would be very helpful if the House could have a new statement on fuel and power policy, as we have been promised?

Mr. Marsh: My hon. Friend does not do himself justice if he thinks that we can produce a new fuel policy in a matter of two or three months. These are very important and serious decisions. In the short term they will take us certainly until the end of this year and into the first couple of months of the next. In the long term the model will take longer than that.

Mr. Lubbock: Is the Central Electricity Generating Board making investigations into the possibility of using natural gas in peak load gas turbines, particularly bearing in mind that this would save imports of oil?

Mr. Marsh: I understand that the C.E.G.B. is looking at this question. In the first instance, it would have to put proposals to me and so far it has not done so.

Steel Industry

Sir G. de Freitas: asked the Minister of Power what plans he has for ensuring participation by the workers in the management of the publicly-owned steel industry.

Mr. Marsh: I would refer my hon. Friend to my remarks in yesterday's debate.

Coal Prices

Mr. Alison: asked the Minister of Power whether, in the light of Her Majesty's Government's call for a standstill on prices and services and for a standstill on wages, he will issue a general direction to the National Coal Board, in the national interest, to extend the present period of reduced summer coal prices for the period of the standstill.

Dr. Bray: No, Sir. The summer reduction in prices, which applies only to coal for the domestic market, is a deliberate discount on normal prices to encourage stocking.

Mr. Alison: But is not the hon. Gentleman aware that it is precisely for the domestic consumer that we should temper the wind to the shorn lamb? Is he aware that the pay freeze which the Prime Minister has announced is not to be matched by a price freeze because of the Government's own measures? Will he take steps to see that the price of coal is kept low for people on low fixed incomes?

Dr. Bray: Every endeavour is made to keep the price of coal low and the summer prices are deliberately reduced in order to encourage people to build up stocks. This is quite a different matter from a normal price increase.

Mr. Eadie: Is my hon. Friend aware that he would make a great contribution to price stability in Scotland if he were to reduce the selective coal price increase in Scotland?

Dr. Bray: The differentiation between coal prices in various parts of the country reflects differences in production costs. The Government have taken the view that prices should correctly represent costs and the way in which we can secure cheaper coal prices in Scotland is to reduce the relative cost of production there. Every effort is being made to that end.

Uneconomic Pits (Manpower)

Mr. Alison: asked the Minister of Power to what extent he estimates that the exclusion of development areas from certain of the Government's restrictive economic measures will retard the redeployment of manpower from uneconomic pits.

Mr. Marsh: I do not expect any change on this account.

Mr. Alison: Does that mean that the right hon. Gentleman expects that redeployment of manpower from uneconomic pits will continue, thus swelling the ranks of the potentially unemployed in non-development areas?

Mr. Marsh: Redeployment has not so far increased unemployment in those

areas, and there is no reason why it should do so in future. At the moment, there is a shortage of coal miners in some pits and a surplus in others. What we are trying to do is to move them from the one to the other.

Mr. Corfield: Does not the right hon. Gentleman's Answer imply that potentially productive and profitable pits will fare worse than potentially unprofitable pits under the credit squeeze?

Mr. Marsh: No, Sir.

Mr. Peyton: The right hon. Gentleman has not answered this very important Question. Does he not think that the whole of recently announced Government policy will have the effect of prejudicing the position in the East Midlands and Yorkshire, where it is absolutely vital to get men?

Mr. Marsh: Not at all. I should have thought that it would do the contrary. There are jobs in pits within the East Midlands and Yorkshire and we passionately want men to take those jobs.

Capital Expenditure (Development Areas)

Mr. Biffen: asked the Minister of Power if the deferred capital expenditure plans for the coal industry arising from recent proposals to reduce demand in the economy will apply only to activities outside development areas.

Mr. Marsh: I am expecting to receive the Board's proposals shortly for giving effect to the cut in investment but I have no doubt the Board will, where practicable, avoid cutting expenditure in development areas.

Mr. Biffen: Are we to assume from that Answer that the cuts in the investment proposals of the nationalised industries, including the National Coal Board, were decided by the Government without any prior consultation with those industries?

Mr. Marsh: The cuts were decided in the light of information which we received from the industries. Consultation with the industries is still continuing.

Mr. Patrick Jenkin: Does this mean that there will be a cut in the investment in the profitable coal mining areas of the East Midlands and Yorkshire and


no cut in investment in areas where the coal industry is declining, such as Durham and Scotland?

Mr. Marsh: It is not a question of using these cuts in this way. It is a question of making the economies which are necessary by agreement with the N.C.B. in ways which will not prejudice the Board's operations.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

United Nations Development Programme

Mr. Hooley: asked the Minister of Overseas Development whether he will increase the United Kingdom contribution to the United Nations Development Programme of 1966 from £4,200,000 to £5,150,000 and pledge £5,800,000 for 1967.

The Minister of Overseas Development (Mr. Anthony Greenwood): I am sure that my hon. Friend will appreciate that in present circumstances I am unable to contemplate any increase in the United Kingdom contribution.

Mr. Hooley: Is my right hon. Friend aware that the effect of an increased contribution on our balance of payments would be more favourable than otherwise, since large amounts of this money would be spent in dollars within the sterling area?

Mr. Greenwood: I appreciate what my hon. Friend says, but we must keep a sense of proportion about this. Our last increase was in 1965 and was 171 per cent. and we are the third largest contributor to the funds of the United Nations Development Programme.

Sir C. Taylor: Will the right hon. Gentleman consider doing this out of borrowed money?

Oral Answers to Questions — TECHNOLOGY

Industries (Statistics)

Mr. Biffen: asked the Minister of Technology if he is satisfied that the data he possesses is comprehensive and reliable enough to produce an index of wage/ salary cost per unit output and capital employed per unit output for the

mechanical engineering, electronic, telecommunication, computer and machine tool industries; and if he will make a statement.

The Minister of Technology (Mr. Anthony Wedgwood Beim): No, Sir.

Mr. Biffen: Would not the right hon. Gentleman agree that these indices are the necessary indicators of industrial efficiency? If he does not possess this information, how could his predecessor say in a public speech that some companies in the engineering industry were more than twice as efficient as others?

Mr. Benn: Some of the comparisons which have been published were based on particular studies in particular industries, but the information for which the hon. Gentleman asks in the Question is not in any case exactly the information in the form in which we would want it. It would be not only working capital in which we would be interested, but probably more investment in plant and investment per unit output.

Sir H. Legge-Bourke: Would not the right hon. Gentleman accept that in order to fulfil his sponsorship of the industries mentioned in the Question, it is essential that he should be able to obtain wage/salary cost per unit figures? Is he doing anything about getting them?

Mr. Benn: It is certainly true that a great deal more information is needed in order to be able to do the job which we have been set up to do. Good companies, of course, provide this information themselves as part of cost control and it is our job to encourage other companies to do the same. But the answer to the Question is that there is not yet sufficient information on a scale to publish an index.

Oral Answers to Questions — NATIONAL FINANCE

Income Tax (Seamen's Strike)

Sir F. Bennett: asked the Chancellor of the Exchequer what is the estimated loss to the Revenue of Pay As You Earn Income Tax arising out of the seamen's strike, taking into account, in addition, refunds of tax during non-working weeks previously paid in any tax year.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): It is impossible


to estimate what additional tax would have been paid by seamen but for the strike.

Sir F. Bennett: Is there no way at all of giving even an approximate estimate of what was lost to the Revenue as a result of this strike, quite apart from other repercussions? Could not the Minister say how it is proposed to make good the short-fall in revenue from this?

Mr. MacDermot: It is impossible to do this, as the hon. Member will appreciate when he reflects on the different times at which ships returned to this country and consequently the different times when seamen began to lose their wages and their liability to Income Tax.

Internal Demand (Restriction)

Sir C. Osborne: asked the Chancellor of the Exchequer if he will give details of the assurances which have been given by and on behalf of Her Majesty's Government of their intention to restrict internal demand; to whom, and on what dates such assurances have been given; what relations these assurances bear to the international monetary transactions of this country; and if he will make a statement.

The Chief Secretary to the Treasury (Mr. John Diamond): No such assurances have been asked for and none has been given.

Sir C. Osborne: Is the Minister aware that the right hon. Gentleman the Member for Nuneaton (Mr. Cousins), in his letter of resignation to the Prime Minister, said categorically that these assurances have been given? He was speaking as a member of the Cabinet. Is the hon. Gentleman aware that the Prime Minister in his reply to that letter never refuted the allegations? Can we have the truth?

Mr. Diamond: I am surprised that the hon. Gentleman asked me that question. I have already answered it. No such assurances have been asked for and none has been given. Ministers are not in the habit of giving information which is not the truth.

Mr. Gresham Cooke: Would the Chief Secretary say whether he is restricting internal demand in the road programme when the Minister of Transport said

only last Friday at the Severn Bridge that there would be no cuts in the road programme?

Mr. Diamond: That is an entirely different question which ought to be addressed to my right hon. Friend the Minister of Transport.

Mr. Iain Macleod: Would the Chief Secretary acknowledge that the words used by my hon. Friend the Member for Louth (Sir C. Osborne) are a direct quotation from the resignation letter of the right hon. Gentleman the Member for Nuneaton? Was the right hon. Gentleman telling an untruth?

Mr. Diamond: The right hon. Gentleman knows that I am not responsible for what anyone else says. I have not got the letter here and I was not asked about it. It is an entirely different matter. I was asked a Question and I have given a very full, accurate and truthful Answer.

Selective Employment Tax

Sir F. Bennett: asked the Chancellor of the Exchequer to what precise extent the fixed-price contracts existing at the time of the introduction of the Selective Employment Payments Bill between Government Departments and local authorities on the one hand and private contractors on the other will be modified to meet the new tax.

Mr. Diamond: I would refer the hon. Member to the statement I made to the House on 21st July during the Committee stage of the Selective Employment Payments Bill.

Sir F. Bennett: Since the right hon. Gentleman has very recently expressed pride in his own integrity, may I ask him to recall that when I put a Question recently, the Chancellor said that if I tabled a Question in this form he would give me a definitive answer? Therefore, would he kindly give some sort of estimate as to what proportion firms can expect to recover on fixed-price contracts as a result of the changes due to the Selective Employment Tax? Is it to be 100 per cent., 50 per cent. or 75 per cent.? Can we have a truthful answer?

Mr. Diamond: If the hon. Gentleman did not get so excited I could hear more accurately what information he is asking


me for. If he is asking me what proportion this tax would represent, it represents 2 per cent. of the costs and therefore the refund which is proposed would cover all except something like one-quarter of 1 per cent. of the cost involved.

Fuel Duty (Scotland)

Mr. Buchanan-Smith: asked the Chancellor of the Exchequer what will be the cost to the North-East of Scotland in a fall year of the increase in road fuel duty announced on 20th July.

Mr. Buchanan-Smith: asked the Chancellor of the Exchequer what will be the cost to Scotland in a full year of the increase in road fuel duty announced on 20th July.

Mr. MacDermot: The additional duty on road fuel in Scotland is estimated at about £5½, million a year. Estimates cannot be made for particular areas of Scotland.

Mr. Buchanan-Smith: Would not the hon. Gentleman agree that this increase in duty bears particularly hard on the remoter areas of Britain, particularly on Scotland and, contrary to what his right hon. Friend the Prime Minister said in his statement last week, Scotland is by no means exempted from the effects of the Government's economic measures?

Mr. MacDermot: No. I would not accept that. There is no evidence that the fuel duty will bear more heavily on such areas, and the measures as a whole are designed to avoid imposing an undue burden upon development areas.

Surtax

Mr. Maude: asked the Chancellor of the Exchequer what he estimates will be the effect on the balance of payments, or on the current level of demand, of the proposal to increase payments of Surtax made in September, 1967.

Mr. MacDermot: The additional revenue is estimated at £26 million. The effect of this upon demand cannot be accurately assessed.

Mr. Maude: Is the hon. Gentleman aware that this does not answer the Question? Is he aware that this is a measure which cannot possibly be effec-

tive before September, 1967? We understand from the Prime Minister that the crisis of demand in the balance of payments is an immediate one. Could he say what effect this is likely to have on the current crisis?

Mr. MacDermot: It can have an effect before September, 1967, if Surtax payers reduced their expenditure in anticipation of paying the duty, but it is impossible to estimate the extent to which they will do so.

Mr. Maude: asked the Chancellor of the Exchequer why the Government have selected Surtax-payers, irrespective of their contribution to the national economic effort, as the only members of the community whose net incomes will be specifically reduced by the new economic measures.

Mr. MacDermot: We are all being called on to make sacrifices. It is right to ask for something extra from those with the biggest incomes.

Mr. Maude: Is it not a fact that, whereas the Government are saying to all the other members of the community that their disposable incomes may not be increased, they are saying to Surtax-payers that theirs will be specifically reduced? Is this a sensible way to give incentives to senior managers and technologists, upon whom our industrial future depends?

Mr. MacDermot: I am sure that the hon. Member will appreciate that some of the other measures will bear more hardly upon other people than they will upon Surtax-payers. As far as the particular class of Surtax-payers to which the hon. Gentleman has referred is concerned, I would remind him that the earned income allowance provisions will still apply to them.

Oral Answers to Questions — VIETNAM

Mr. Marten: asked the Prime Minister what agreement he has reached with President Johnson about the extent to which Her Majesty's Government will give their support to the bombing of particular targets in Vietnam.

The Prime Minister (Mr. Harold Wilson): I have fully explained to the


House on a number of occasions our attitude on bombing in Vietnam.

Mr. Marten: If the Prime Minister is considering dissociating himself from any further American bombing of military targets, may I ask him to take no premature action or make no premature statements before the results of the bombing are known? Secondly, will he give an assurane that he will consult beforehand with the Australians and New Zealanders?

The Prime Minister: The position on bombing was explained in the House on 21st December last after my discussions with President Johnson. What I said then still stands in relation to bombing of populated cities. I think that the hon. Gentleman can safely leave the conduct of my discussions with President Johnson to me.

Mr. Winnick: Is the Prime Minister aware that opinion polls seem to show that there is more support for the Government's dissociation from the bombing of Hanoi and Haiphong than for the Tories' line of complete support for the Americans? Is the Prime Minister further aware that some of us would like to see an escalation of the dissociation from American policy in Vietnam?

The Prime Minister: My reading of the public opinion polls leaves me in a state of some confusion. Apparently, public opinion is more favourable to the Government's policy on Vietnam than it was on the last occasion when the same questions were asked, but public opinion, according to the public opinion polls, seems less in support of American policy than it was.

Sir Alec Douglas-Home: Is it not quite clear, and does not the Prime Minister agree, that there has been no bombing of populated cities, and that this is clearly not intended from what the President of the United States has said? When the Prime Minister sees President Johnson will he assure him that the Anglo-American alliance will in future rest upon trust and not upon suspicion?

The Prime Minister: Yes, Sir. The Anglo-American alliance does rest upon trust. [Interruption.] Much more so

than at the time when the right hon. Gentleman spoke with two voices on the question of buses to Cuba. I know the difficulties that I have had to clear up arising out of that trouble. So far as the earlier part of the right hon. Gentleman's question is concerned, we made clear to the United States, and they understood this, that we are opposed to the bombing of Hanoi and Haiphong. That was and is our position.

Oral Answers to Questions — NUCLEAR TESTS

Mr. Marten: asked the Prime Minister what approaches he has recently made to President de Gaulle about nuclear tests.

The Prime Minister: None, Sir. The French are fully aware of our concern about their current programme of nuclear tests in the Pacific.

Mr. Marten: Is the Prime Minister aware that the French Government take the view that independent nuclear arms are essential for independence? Before he finally gives up Britain's nuclear independent deterrent, would he please balance very carefully, and very purposively, these views of the French Government?

The Prime Minister: I am also aware that the French Government have consistently operated in defiance of the test ban negotiated by right hon. Gentlemen opposite. I hope that the hon. Gentleman is not trying to justify their defiance of the test ban, signed in Moscow three years ago. So far as these tests are concerned, we have made our position clear to them, although I am glad to be able to inform the House that we have received assurances from the French Government that they will take steps necessary to ensure that no risk to British subjects in the area, which is one of our main anxieties, will be occasioned by the tests.

Mr. Hogg: Can the Prime Minister give us news of any additional fall-out from the atmosphere as monitored by our experts as a result of these tests?

The Prime Minister: No, not yet. However, if the right hon. and learned Gentleman tables a Question, I shall be glad to give him an answer to it.

Oral Answers to Questions — GIBRALTAR

Mr. Farr: asked the Prime Minister why he will not arrange that on 1st August, 1966, when the Colonial Office closes down, responsibility for Gibraltar is assumed by the Home Office.

The Prime Minister: After considering all the arguments, I judge the balance of advantage to be clearly against such a course, Sir.

Mr. Farr: Is the Prime Minister aware that this is just the sort of firm decision which is required at the moment? It is not only desired by the Gibraltarians but it is needed by the Spanish.

The Prime Minister: When I was there last October, this was one of the objects being canvassed in Gibraltar. But I was very clear, despite the superficial attractions of the proposal, that the Gibraltarians themselves were very clearly against this suggestion. I therefore thought it right to make our position upon it clear.

Sir A. V. Harvey: I recognise the necessity to bring about economies in some of the defence forces, but does the right hon. Gentleman think that this is the best week, in the middle of negotiations with the Spanish Government, to announce the withdrawal of half of one Coastal Command squadron from Gibraltar?

The Prime Minister: The Coastal Command squadron in Gibraltar has no relevance to any relations with Spain because the functions of the Coastal Command squadron, as the hon. Gentleman knows better than any of us, were related to very different matters. But as long as the Spanish Government clearly understands our position on Gibraltar, I am satisfied that the withdrawal of the Shackletons makes no difference.

Mr. Heath: Can the Prime Minister say anything about the discussions which are now reported to have broken down? Particularly, can he tell us what proposals have been made by the Government about the use of the airfield at Gibraltar by Spanish civil and military aircraft? Can he confirm that no proposal was made which would allow Spain

to take part in the administration of Gibraltar'?

The Prime Minister: I have react some fantastic Press accounts of what is supposed to have been offered to Spain. I am glad to have this opportunity of denying many of these stories. On the questions raised by the right hon. Gentleman the Leader of the Opposition, I am sure that my right hon. Friend the Foreign Secretary would desire to put the House more fully in the picture before it adjourns.

Oral Answers to Questions — STEEL INDUSTRY

Mr. Kenneth Lewis: asked the Prime Minister whether he will appoint a Minister of State with special responsibility for the steel industry.

The Prime Minister: No, Sir.

Mr. Lewis: Would it not be better for the country, and for the £, if we had a Minister who was prepared to co-operate with the steel industry rather than to nationalise it?

The Prime Minister: I thought that this matter was very fully debated yesterday, and I thought, impartially and objectively, that the victory on the argument was as decisive as the victory on the vote.

Oral Answers to Questions — HOUSE OF LORDS (MINISTERS)

Mr. Kenneth Lewis: asked the Prime Minister whether he will take steps to increase the number of Ministers in the House of Lords.

The Prime Minister: I have no immediate plans for this, Sir.

Mr. Lewis: Is not the Prime Minister being rather unfair to their Lordships in so far as he has depended on them so heavily in the Parliamentary Labour Party meetings upstairs where he has received their votes on more than three occasions?

The Prime Minister: No, Sir; there is no question of that. In accordance with the usual practice in the Parliamentary party, their Lordships as well as the Members of the House of Commons are entitled to vote. But I can assure


the hon. Gentleman that he need have no anxiety. The support of the Government in the Parliamentary party in the Commons is quite adequate for dealing with everything that right hon. and hon. Members opposite can throw against us.

Earl of Dalkeith: rose—

Mr. Shinwell: rose—

Mr. Speaker: The Earl of Dalkeith.

Mr. Shinwell: Him instead of me?

Earl of Dalkeith: Can the Prime Minister say whether there is any truth in the suggestion that he is prepared to accept the title of Duke of the Scillies so that he can carry on as Prime Minister in another place further out of the reach of his revolting back benchers?

The Prime Minister: I can assure the hon. Gentleman that there is no truth in that suggestion. Reverting to the Question on the Order Paper, and not some of the rather more frivolous supplementary questions, I think that the wish of the House, and the trend of constitutional development, is that as many Ministers as possible should be answerable to this House and not to another place.

Mr. Shinwell: Does my right hon. Friend now realise what happens when a member of the Peerage is allowed to address the House? Since the Parliamentary Labour Party has been mentioned, is my right hon. Friend aware that its proceedings are made known to the public, whereas heaven knows what goes on in the 1922 Committee?

Oral Answers to Questions — FAR EAST

Mr. Hamling: asked the Prime Minister what discussions he has had with the President of the United States on Great Britain's defence role in the Far East.

The Prime Minister: As my hon. Friend knows, I hope to be meeting President Johnson later this week. I reported to the House on 21st December on my last talks with him.

Mr. Hamling: Would my right hon. Friend bear in mind that it would be most beneficial to sterling if an agreement could be reached to cut down on our commitments in the Far East?

The Prime Minister: In my statement last Wednesday, I informed the House of the economies which we were making in Government expenditure overseas. I do not believe that that has anything very much to do with the Question on the Order Paper. We are, of course, in continuous discussion with the United States and with our other allies and Commonwealth partners on all matters concerning Britain's defence role.

Rear-Admiral Morgan Giles: In any discussions which the Prime Minister may have on this subject, will he bear in mind the moral responsibility which Her Majesty's Government have for continuing our contribution to peace-keeping in the Far East? Will he also bear in mind particularly our obligations towards Australia and New Zealand?

The Prime Minister: I have answered this on a number of occasions and in speeches outside the House, including my speech to the Australia Club when Mr. Holt was in this country. We accept all the obligations set out in the Defence White Paper. However, we insist that they be carried out with the maximum degree of economy, and the maximum degree of value for money, which has long been lacking in our defence posture overseas.

Sir Alec Douglas-Home: Apart from our particular role in the Far East, is it not very important that discussions should now take place between United States and the S.E.A.T.O. partners as to the future collective security aspect of South-East Asia and particularly to try to organise some collective security system by Asians for Asians with Western backing? Has the right hon. Gentleman promoted anything of that kind?

The Prime Minister: The right hon. Gentleman, who is always very well informed on these matters, will not have omitted to read all that went on in the recent Canberra Conference of S.E.A.T.O., in which particular emphasis was laid, as the right hon. Gentleman is laying it, on action by Asian countries in their own self-defence. This was one of the central themes of the Canberra Conference of S.E.A.T.O. The right hon. Gentleman will be further aware that my right hon. Friend the Foreign Secretary took the opportunity afforded by that visit for very far-reaching discussions on Asian defence


and Asian partnership with Australia, New Zealand and the United States.

Mr. Frank Allaun: Would my right hon. Friend tell the President that last week Mr. McNamara, in an interview, had the effrontery to say that it is essential that Britain keeps her troops east of Suez? Would he tell the President that we shall not bankrupt ourselves just to satisfy Washington?

The Prime Minister: I am sure that the President will be well aware of statements made by members of his Cabinet. I am sure that the President will be aware of our policy on defence and foreign affairs set out in the Defence White Paper approved by the House before the General Election and subsequently in debate.

Oral Answers to Questions — PARLIAMENT (SECOND CHAMBER)

Mr. William Hamilton: asked the Prime Minister if he will initiate interparty talks with a view to legislation on the problems of the composition, powers, and functions of a second Chamber of Parliament.

The Prime Minister: No, Sir.

Mr. Hamilton: Is my right hon. Friend aware that we are getting a bit tired of these dusty answers whenever we raise this question? Does not he recognise that the present constitution of the other place is a continuous affront to all true democrats, particularly those on this side? If he is not prepared to enter into consultations with the other party, will he forthwith get rid of the hereditary element in the other place?

The Prime Minister: I am well aware of my hon. Friend's feeling about this matter, and indeed I am probably aware of some of the reasons for his feelings. [interruption.] My hon. Friend is a Scottish Member: he is well aware of the power of feudalism in that country. As I have said to my hon. Friend on a previous occasion, I believe that there is no general or united desire in the House as a whole, or even on this side, that we should start examining the question of the composition of their Lordships' House. What we are, and must be, concerned with—and this was the

only issue on which my hon. Friend and I and others fought the election in our manifesto—is the danger of another place interfering with decisions of this elected Chamber.

Mr. Lubbock: Will not the Prime Minister at least recognise that there is general agreement on all sides that the hereditary principle is outdated and must go? Will he not, therefore, see whether this is not the starting point for discussions on the lines proposed by his hon. Friend?

The Prime Minister: I well understand the hon. Member's concern, too, about the dangers of the hereditary peerage. All I can say to him is that, since the present Government was formed, no hereditary peerages or baronetcies have been created.

Mr. Gwilym Roberts: Is my right hon. Friend aware that there is a strong feeling on this side of the House that interparty discussion in this matter could achieve very little and that, if we are to get reform in this place and in that other place, the Government should be prepared to act unilaterally and to act now?

The Prime Minister: The question of any actions taken in respect of another place is really a matter of legislative priorities, and I could think of more important priorities for the legislative programme. If, however, there were to be any move forward in these matters, at least we could all agree on the question of the powers of another place to frustrate decisions of this House. There might be a lot of disagreement about the composition of another place.

Mr. Woodburn: Is my right hon. Friend aware that in the conversations that have previously taken place to try to deal with this problem, nobody has yet found the solution of altering the composition of the House of Lords without strengthening its powers and that this House has always been very reluctant to add any powers, either moral or otherwise, to the House of Lords by altering its composition?

The Prime Minister: I should be very surprised if in this day and age any hon. Member of the House wanted to increase the powers of another place—that, I should have thought, was uncontroversial


—or, indeed, to alter the influence of another place. I am sure that the trend of future years must be to reduce the powers of another place because of the danger, particularly in the concluding years of a Parliament in which the House of Commons did not have a Conservative majority, that the decision of the people expressed in an election could be frustrated by unilateral action in another place.

AIRCRAFT NOISE

3.30 p.m.

Mr. Hugh Jenkins: I beg to move,
That leave be given to bring in a Bill to restrain nuisance by aircraft noise; to restore freedom to pursue actions against aircraft owners and operators for nuisance by noise and vibration; to empower the President of the Board of Trade more effectively to limit and restrain aircraft noise; to empower the Parliamentary Commissioner to inquire into and report on all such questions; and for purposes connected therewith.
If I may quote the Long Title of the Bill, it is a
Bill to restrain nuisance by aircraft noise: to restore freedom to pursue actions against aircraft owners and operators "—[Interruption.]

Mr. Speaker: Order. The House decided that leave to introduce a Bill under the Ten-Minute Rule should be asked for at this time of day. I hope that hon. Members will listen or will leave the Chamber quietly.

Mr. Jenkins: This is a Bill, to quote the Long Title,
to restrain nuisance by aircraft noise; to restore freedom to pursue actions against aircraft owners and operators for nuisance by noise and vibration; to empower the President of the Board of Trade more effectively to limit and restrain aircraft noise: to empower the Parliamentary Commissioner to inquire into and report on all such questions; and for purposes connected therewith.
One duty of Parliament, and an increasingly important one, is to see that the interests of the community as a whole are not overriden by technological advance. It is not for us to adapt ourselves to the machine, but to adapt the machine to ourselves. Scientists are over-fond of testing the limits of human tolerance to noise. They would be better advised to accept a limit well below the level of human tolerance and work to that.
We failed to control the internal combustion engine, which is choking our cities, and we are failing to grapple with the jet engine, which is making life quicker for those who fly with it at the cost of severe distress for many thousands who live near the great airports.
It is necessary to assert the needs of the community on the ground over the minority who are flying at any one time. The aim, however, must be not to prevent technological advance, but to forbid


its more anti-social manifestations. More and more people will use jet aircraft—when the Government permit—and the matter cannot wait, because the development of supersonic aircraft with sound-barrier and ear-drum breaking claps of noise beyond the loudest thunder will bring this matter, which is already approaching the bounds of human toleration, well beyond it.
Many Members of the House and others have tried methods of seeking relief. 1 do not complain that when hon. Members have heard the subject they should feel, "We have been here before". The correspondence on this matter, however, continues to grow. The file I have with me is only this year's correspondence for one hon. Member; and I have a file equal in size to it for 1965 and one almost as large for 1964. There have been discussions, meetings, deputations and publicity. Almost everything has been tried. The Ministry of Aviation,' in the person of its various Ministers and Parliamentary Secretaries, has been unfailingly courteous and has occasionally conceded a point here and there.
Night flights have been cut. Landings have been transferred from one flight path to another or sometimes even from one airport to another. When the fuss breaks out elsewhere, however, they seem to be quietly transferred back to the point where the original fuss broke out. At least, that is what the figures with which the Ministry of Aviation has provided me over a period seem to suggest. Internal jet flights are now allowed in spite of the fact that British European Airways did not want them and of the relatively small saving in time.
Soundproofing of houses has been conceded, but this is no answer. Summer is the time when the noise is at its worst. People should not be compelled to seal themselves like prisoners in their own houses because to open the windows is to admit ear-splitting roars and screams which cannot be borne at the frequencies which are now customary at the peak season. It is medically agreed that the more often the noise is repeated, the less it can be borne. Landings at Heathrow in summer on a single runway average 10 per hoar, which means that at peak times my constituents and those of other hon. Members are being bashed every few

minutes, and sometimes every minute, for long periods.
The community needs protection against itself. Endeavours to give this protection have been made in many countries. International agreements will have to be reached, because the silencing of aircraft is not only a matter of scientific development but is also one of economics and finance. It is already possible to reduce noise to a tolerable level at a cost in payload of about 5 per cent., but which country will make that sacrifice or impose it upon others without international agreement?
In the United States, Congressman Herbert Tenzer, whose constituency in relation to Kennedy Airport, New York, is geographically about the same as my constituency of Putney to London Airport, is proposing legislation similar in some ways to that which I now seek the leave of the House to introduce. We cannot, however, hope to get effective international agreement without starting to put our own house in order. Perhaps there are those who have given up and who go through the motions of protest to assuage public opinion while privately believing that little or nothing can be done. I do not accept that, and my Bill would ask the House not to accept it. It is certainly not accepted by the sponsors, of all parties, drawn from hon. Members with constituents living under the glide paths.
We could not expect more than we have received from the Ministry of Aviation, for, in spite of the helpfulness of its Ministers, it is primarily a noise-making Ministry and not a noise-preventing one. It is concerned with flying and not primarily with those on the ground. Perhaps we shall be able to do better now that responsibility has been transferred to the Board of Trade.
One of the things which the Bill would seek to do is to strengthen the power of the President of the Board of Trade to limit and to restrain aircraft noise. It would seek to reduce the permitted level of noise which, at the moment, is 110 perceived noise decibels by day and 102 perceived noise decibels by night. There is a certain noise level going on in the House at the moment, but I am glad to say that it is considerably below the level


of the aircraft noise which I seek to restrain.
The Bill would seek to reduce the level to 100 noise decibels immediately, and then to 90 noise decibels over a period of five years. That is a perfectly practicable proposition, and there is no reason why it should not be done, given a little determination on both sides to push it through.
The Bill would restore freedom to pursue actions against aircraft owners and operators for nuisance by aircraft noise. We can never hope to tackle the problem while those who make the noise enjoy legal immunity. The Bill would provide a defence against such actions if it could be proved that a noise level of no more than 100 decibels was being produced at the time.
It would empower the Parliamentary Commissioner, or Ombudsman, to inquire into and report on matters of aircraft noise, and that may entail an Amendment to the Bill just published by the Government. The Bill, also, may contain other provisions which I have circulated to interested hon. Members and the Minister. For example, it would require the Minister to initiate a new international airport on the South-East coast.
I recognise that another proposal to prohibit jet flights over land altogether, which was contained in a document that I circulated to hon. Members, may perhaps have to be amended in Committee when—and I hope that the House will allow me to say that rather than "if" —we reach that stage.
The measures to which I have referred, and which are contained in the LONG TITLE of the Bill, are essential if we are to begin to tackle a problem which we must tackle if life is to remain tolerable or, in many areas, become tolerable for the thousands of people who live near large airports in several parts of these small islands.
I do not ask the Government to say that they accept the Bill. I ask them-to say that they recognise the need and will give me leave to introduce it, will-study it when it is printed, and will do so with the intention of making real progress in limiting a menace which has become intolerable in the full sense of the word.

Question put and agreed to.

Bill ordered to be brought in by Mr. Hugh Jenkins, Mr. Russell Kerr, Mr. Gresham Cooke, Miss Joan Lestor, Mr. John Smith, Mr. John Ryan, aid Mr. Reader Harris.

AIRCRAFT NOISE

Bill to restrain nuisance by aircraft noise; to restore freedom to pursue actions against aircraft owners and operators for nuisance by noise and vibration; to empower the President of the Board of Trade more effectively to limit and restrain aircraft noise; to empower the Parliamentary Commissioner to inquire into and report on all such questions; and for purposes connected therewith, presented accordingly and read the First time; to be read a Second time upon Friday, 25th November and to be printed. [Bill 91.]

ECONOMIC AFFAIRS

Mr. Speaker: Order. Before the debate opens, I would remind the House, that, so far, 77 right hon. and hon. Gentlemen have indicated their desire to take part in this debate. I hope that right hon. and hon. Gentlemen will co-operate. The longer the speeches, the fewer can speak in a debate in which so many want to take part.

3.44 p.m.

Mr. Edward Heath: I beg to move,
That this House has no confidence in the competence of Her Majesty's Government to manage the economic affairs of the nation.
There can be no mistaking the gravity of the economic situation which we are debating this afternoon. The measures which the Prime Minister announced last Wednesday were sufficient indication of that. When one thinks that, after all the measures which have been taken, the very large standby which was renewed six weeks ago, the increase in Bank Rate and special deposits on 14th July, the package of more than £500 million deflation on 20th July, and then realises that sterling is less than half a cent. stronger today than it was last Wednesday—it is now only just above 2·79, and far below the parity of 2·80—one has a real indication of the continuing gravity of the situation.
We know, too, the problems which face the country in the future. There is still some hangover of the trade returns on the seamen's strike, though it may prove to be touch smaller than was at first thought. There is the usual seasonal pressure on the £ in the autumn because of the level of imports at that time. There is also the big forward position which is being built up again. These are the immediate problems which the Government face, having taken the action that they did last Wednesday.
I want to say a word about the task of the Opposition. As the Official Opposition, our duty lies to the nation and not to the Government. Our task is to expose the facts, whether or not they are palatable to the Government. We will support measures which we believe will help the situation, though we have no responsibility for it. As the Minister of Labour

and the First Secretary said after the General Election:
There are no alibis for the Labour Government now.
Nor are we responsible for the hardships which will be brought to the British people as a result of the measures which the Prime Minister announced. We shall also offer to the House our own proposals, as we have done constantly in the past and which the Government have repeatedly failed to accept.
What this series of crises has shown clearly is that it is not only a question of policies. If it had been that, under any other Government the emergency measures which have been taken over the past 21 months would have been more than enough to deal with any situation. It is not the measures; it is the weaknesses and failings of the men behind the measures which are the cause of the crisis at the present time.
Let us look for a moment at The New Britain:
The world wants it and would welcome it. The British people want it. deserve it, and urgently need it … A New Britain … affording a new opportunity to equal, and if possible surpass, the roaring progress of other Western Powers … The country needs fresh and virile leadership.
My next sentence is:
Labour is ready.
It ought to be, "Labour is late."
Poised to swing its plans into instant operation. Impatient to apply the New Thinking that will end the chaos and sterility.
It goes on:
Here is Labour's Manifesto for the 1964 election, restive with positive remedies.
"Let's go with Labour", they said. Where have they gone? They have gone to the longest period of 6 and 7 per cent. Bank Rate ever, to stagnant production, to nearly £1,200 million of additional taxation, to a wage freeze, to a credit squeeze and policies publicly announced for creating nearly half a million unemployed.
This is the twenty-third dose of restriction or borrowing in 21 months. This is not what the people wanted, nor is it what the people deserve. This is what the Labour Government have brought forward. I believe that historians will say that Wednesday 20th July was a watershed in British politics, because on that day the Prime Minister


exploded every myth, and shattered every illusion, which had been nurtured by the Left for years and foisted on the people.
The right hon. Gentleman knows, and hon. Gentlemen behind him know, that after that announcement nothing can ever be the same again. Never again will the Labour Party and hon. Gentlemen opposite be able to say that a Labour Government will never impose a wage freeze. Never again will they be able to say that a Labour Government will never impose deflation. Never again will they be able to say that a Labour Government will never put forward policies to create unemployment, and never again will they be able to hold up these targets in the National Plan. They have done all those things, and they have done them with a vengeance.
This has obliterated their right, which they claimed from time to time in the past, to criticise their opponents for measures far less drastic than the Chancellor and the Prime Minister have announced over these 21 months. But in the process of foisting these illusions and myths on the people they have undermined the will and the determination to do things the hard way, because they have always proposed the easy remedy. They won two elections on easy remedies, but they will not win a third.
Let us look at the handling of this recent situation. The Prime Minister dealt with it in his television broadcast, when he said:
Up to three weeks ago, everything suggested that the progress that we were making meant that we would be paying our way by the end of this year, or at any rate not too late next year … And then suddenly we seem to have been driven off course, one thing, of course, that has hit us has been the seamen's strike.
In his statement in the House the right hon. Gentleman said that he had been blown off course by the seamen's strike. That seems to be a proper metaphor to use.
What a picture it conjures up of Her Majesty's Government sailing in the splendid ship of State at what is the right rate of knots for the Government, and carousing in the cabin. Suddenly, in a calm sea, and on their prosperous voyage, they find that the whole thing is under the control of that "small, tightly-knit group of politically motivated men".

and to their surprise they are sailing in the opposite direction.
What nonsense that was, and the Prime Minister knew it. Everything was not fine until the seamen's strike. Sterling had been deteriorating steadily since February. The right hon. Gentleman should look at the graph, which shows it clearly. Everybody knows it. The Prime Minister may say that a day or two before the seamen's strike figures were better, but we do not know, because they were not published.
The whole picture of sterling from February onwards was deteriorating. The reserves were boosted by the Chancellor's announcement on 1st March of the sale of American securities, but they dropped after that every month, and everybody knew it. It was well known before the election that the Chancellor would not balance the payments this year. The Institute pointed it out and gave the figures, and we pointed it out to the right hon. Gentleman time and again during the election campaign.
The Chancellor introduced his mini-Budget on 1st March. Let us look at some of the comments on that. If the Prime Minister really wants to believe that everything was fine, perhaps I might point out that on 2nd March The Times said:
So far as the economy was concerned it was all exhortation and no bite.
The Daily Mail, perhaps a little more succinctly, said:
All bull and no bite. That was the reaction yesterday to the Chancellor's speech …
So much for the story that everything was fine,
I warned the country throughout the election—[HON. MEMBERS: "Oh."] Let me read to the House what I said at Glasgow on 23rd March. I said:
The threat we are facing today is the greatest that any nation can face short of war itself. Unless we take action to avert it, we are faced with the threat of national bankruptcy. Britain must awake again to the danger that threatens, and in some ways it is more insidious than that of 30 years ago. It is a danger from inside and not outside that threatens us.
The Prime Minister's comment was that we were preaching doom without due cause. Does he still think that after the measures which he had to announce last Wednesday?
It is no use the Prime Minister talking, as he did at Question Time the other day, about the cost of our programme. He never found time to read our manifesto. That was apparent all the way through. If he had read it, he would have seen the undertaking in the foreword over my signature:
I know that we shall inherit from the Labour Government a weak economic position. and I intend to give first priority"—
before any programmes—
to the management of our economy, to the strengthening of Britain's competitive position in world markets and to the repayment of the heavy burden of debt which they have incurred.
That was clearly set out. That was the campaign which we fought and the right hon. Gentleman has only to read the reports to find that commentators reported on this. The right hon. Gentleman fought this election, and the 1964 one, on the basis that all was going to be splendid, while all the time there was real anxiety everywhere.
The Chancellor knows why that was so. It was because of the large inflationary wage increases, against stagnant production; and everybody in this country and abroad knows that that is the recipe for disaster. This was the cause of the trouble, but it was never mentioned by the Prime Minister. He blamed the change in the terms of trade, the difficulties of dollar liquidity, and the seamen's strike. He never mentioned the real cause over all these months. Whatever influence these three factors had on the situation, they had all been known about for some time. We had all known about the difficulties of dollar liquidity, and about the changing terms of trade. The Prime Minister knew about the seamen's strike and told the House about the dangers to trade during the strike, but nothing was done about it.
In the May Budget, after the election, the Chancellor was inhibited by his pledge that there would be no severe increases in taxation. Thus, to avoid the impact on individuals he created the Selective Employment Tax, hastily cooked up, and served half-baked. The Chancellor was prepared to gamble on getting through to the autumn, and then he thought that he would be able to get away with it with some deflation, but he has lost the gamble.
Over the last 16 days, on Sunday, 10th July, the Prime Minister, through No. 10 Downing Street, told the country that everything was fine. Perhaps the Prime Minister wants to deny that. If he does, many people would be interested in hearing it. It was that statement which caused the further trouble with sterling.
After that, the position became worse, and then the Prime Minister took over. We had the increase in the Bank Rate, and we had special deposits, and then he announced measures of a kind unknown at a date unspecified. Could there have been a weaker position than that for any Prime Minister to be in? The impact on the £ was that the 1 per cent. increase in Bank Rate and the 1 per cent. of special deposits did not strengthen it. It became weaker the next day because of the Prime Minister's statement that he would take whatever measures were required, and off he went to Moscow, leaving, we are now told, three civil servants to work out the necessary arrangements.
Last Wednesday, instead of a statement in due time before we rose in August for the Recess, we got the panic measures, and now we know what they are—the wage freeze for six months, the deflation of £500 million, and unemployment, after the redeployment and of the Chancellor's management, running up to 470,000. This is quite clear.
The indictment on the incompetence of these Ministers is that the situation has been developing for months. The Prime Minister refused to reveal the facts at the election. I put a specific question to the Prime Minister and he answered it just before polling day. I asked:
Can Mr. Wilson deny that if he is returned to power there will be an increase in unemployment in this country this winter? 
His answer was:
We sec no reason why it should rise at all apart from seasonal increases.
The second question was:
How does Mr. Wilson propose to pay for his programme, which is based on a growth rate of 4 per cent., now that it is absolutely apparent that this growth rate is not going to be achieved?
The answer was:
It is only apparent to Mr. Heath; it is not apparent to us. We shall pay for it out of the provision in the National Plan involving a growth rate of 4 per cent.


The third question was:
What does Mr. Wilson propose to do if returned to power about the National Nan, which is now totally unrealistic?
The answer was:
We see no reason for
amending the Plan target
at all. The National Plan still stands, and we intend to fulfil it.
That was the basis on which the right hon. Gentleman fought the election. When the situation developed and he got back into power, he failed to take action in time, because the Chancellor of the Exchequer gambled in the Budget.
Then, when the crisis broke, the Prime Minister was completely unprepared and his response was dilatory and complacent. Finally, he rushed in with the panic measures, far more severe, as I said on Wednesday, 20th July, than they need have been if they had been taken in time. [HON. MEMBERS: "Why?"] Because the drain in confidence in the Prime Minister increased greatly during that period. What is more, during that time, from the time when the Prime Minister said that there was no need for action until 10 days later, when he took the final package, tens of millions of pounds drained out of our reserves.

Sir John Eden: That was the give-away.

Mr. Heath: That was the give-away, as my hon. Friend says. That has to be made up.
What about the package which the Prime Minister produced? Let us look at it for a few moments. One could easily deal with it with perhaps a number of quotations:
Production which we need to expand will be held back by the 7 per cent. Bank Rate …
The higher petrol and distribution costs and higher loan charges—has not the Chancellor calculated the effects of these upon our competitive position?
But, of course, like every one of his"—
that is, the Chancellor's—
immediate predecessors. he had to satisfy the international banking community by masochistic and irrelevant cuts in our standard of living, harmful restrictions on our production and needless increases in our costs and price structure, because he believes that international speculators are impressed only by actions which in the long term harm the economy.

By now the Prime Minister will be recognising every one of the statements he made in 1951, when he criticised similar measures.

The Prime Minister (Mr. Harold Wilson): 1961.

Mr. Heath: The right hon. Gentleman knows the year well enough, because this was the time when he was making these criticisms. He also said this:
… we are in danger of earning for ourselves the gibe which the Czar Nicholas addressed to the dying Ottoman Empire, 'The sick man of Europe '."-[OFFICIAL REPORT. 26th July, 1961; Vol. 645, cc. 440–43.]
That is what the Prime Minister is creating by these measures. So I could go on using words of the Prime Minister's.
But I do not want to do that. I want to deal with these measures on their merits. The main ones are devoted to consumption, which we understand. This is necessary in this situation. Of course, the regulator affects the cost of living. Hire purchase will affect individuals, but in this situation the Government have no alternative.
I remind the President of the Board of Trade that there have now been four changes in hire purchase in 13 months. How can our industry organise itself on a proper basis when hire purchase, affecting so much of its production, is changed four times in 13 months?
It is now quite apparent that the figures in regard to Government cuts were just taken out of the air—£55 million for central and local government and £95 million for the nationalised industries. Since then the figures have been broken down and the Chief Secretary to the Treasury has announced individual figures. Nobody knows what is involved in those individual figures. Nobody can say what actually is to be done to make those changes. Therefore, nobody can judge as to their impact. I believe that those for the nationalised industries and a considerable number of the Government ones will affect investment. They will cut back investment radically. There is no indication, but, as far as we can judge, this will be the effect.
The overseas cuts are in a great state of confusion. Nobody knows whether these are the cuts originally planned by the Government and in part announced,


or whether they are in addition. We understand that the Prime Minister still tells us that the figure is £2,000 million at constant prices. How can this be so if there are to be these additional cuts in overseas expenditure? This matter must be clarified by the Chancellor of the Exchequer.
The cuts in our aid programme mean that we shall drop below the 1 per cent. of G.N.P. which was our undertaking at U.N.C.T.A.D. to the developing countries. None of this will have any effect until 1967–68. The Chancellor of the Exchequer may be able to tell us more about the Rhine Army today. I sincerely hope that changes will not be made without going through all the usual procedures, and in agreement with our allies. Why is the Chancellor of the Exchequer trying to insist upon 100 per cent. coverage by the Germans, when we ourselves receive, as he told us in his Budget statement, or in the Budget debate, £40 million in dollars from the Americans for their troops stationed here?
Surely the answer to this is to have a N.A.T.O. pool in which these figures are worked out so that each country makes a foreign exchange contribution. Why does the Chancellor of the Exchequer shake his head? I think that I can tell him the answer to the question I have posed. The reason is that he is afraid he would lose if the thing were done fairly by N.A.T.O. as a whole. Let the Chancellor explain why he will not have a pool to deal with the whole question of foreign exchange.
There is a further point of treaty problems over his travel allowance. Has authority been granted under Article (4) for the travel allowance to be cut in this way? Has that now been cleared, or are we doing this unilaterally?

The Chancellor of the Exchequer (Mr. James Callaghan): The Chancellor of the Exchequer (Mr. James Callaghan) indicated assent.

Mr. Heath: I understand that it has now been cleared with the I.M.F. That is a considerable sacrifice by the I.M.F., because all the Article 8 countries undertook that they would not cut overseas travel allowances or payments of this kind, because it was their responsibility as developed countries to ensure that this aspect of convertibility was maintained.
The Prime Minister made great play of the fact that development areas were being exempted. I want to emphasise here that I personally gave the assurance to Scotland and the North-East that in a time of reduction of capital expenditure, their programmes would not be cut. I did that in the White Paper. The Secretary of State for Scotland and myself, when Secretary of State for Industry, Trade and Regional Development and President of the Board of Trade, gave that assurance.
It is right that that should be honoured. The development areas will be affected by the general cut-back in demand. We all know that the problem is that so many of the firms there are subsidiaries. It is the subsidiaries which suffer first in regional development and not the parent company. This is why the measures which the Prime Minister announced will affect the development areas —not in respect of the cut in capital development from the Government, but in these other ways because of the decrease in demand. Development areas have also been damaged by the Selective Employment Tax.
I turn to the income freeze. What does this mean? It means that the outflow in gold and dollars from our reserves during the 10-day crisis in which the Prime Minister did next to nothing is being met by sacrifices on the part of trade unions, workers, and others. Nobody yet knows how the incomes freeze will work, so hastily has it been imposed by the Government, without thought. If it can be secured, it is desirable. What the Prime Minister and the First Secretary of State must do is to convince the trade union movement and others of the seriousness of the situation and of the determination behind their own policies. We believe, too, that it ought to be a voluntary policy and not a compulsory one.
In 1961, it was clearly laid down that agreements already reached would not be covered by the pause. The Prime Minister has taken the other view. I have no doubt at all that this will create a sense of injustice among those who have gone all through the negotiations, sometimes in a state of great difficulty with the Prime Minister and his colleagues and others, but who are now told that this is not to be included. There will be a


sense of frustration and injustice about it. The danger is that this will endanger the rest of the pay pause and agreement with it. I would prefer that this had been taken into account beforehand, but it has not. Therefore, if the Prime Minister now changes it, he will be accused of weakening.
As to the Prices and Incomes Bill, we read in the Press today that the White Paper and the Amendments are not yet ready—they will be presented at the end of the week—and that the Government now wish to get the Bill through both Houses of Parliament before Parliament rises for the Summer Recess. The Government did nothing for nine months about the Bill, yet they now come to both Houses and say that they want to get it through in nine working days. This is typical of the general mismanagement of the Government's business. It is a disgraceful way to treat the Parliament.
What is the Government's position on the wage freeze? On Thursday, the Prime Minister stated his position, but it began to erode soon afterwards when he said that it was only for a short time and that the sun would shine afterwards. The First Secretary was opposed to the whole thing and offered his resignation. The Prime Minister sent a remarkable message from Moscow to the effect that anybody who offered his resignation would jolly well find it accepted—tough, purposive, gritty. But the first one who offered his resignation found that he had hours of personal attention from the Prime Minister, who refused to accept it. There cannot be any confidence in the Government's policy so long as the Prime Minister and the Deputy Prime Minister are believed to be at loggerheads even on fundamental aspects of policy.
This has been for long the trouble with the Government. We were in some doubt whether the Chancellor or the First Secretary was in charge of economic policy. Now there is doubt whether the Prime Minister and the First Secretary are in agreement. What chance did the First Secretary stand against the right hon. Member for Nuneaton (Mr. Cousins), who had the courage of his convictions? The First Secretary has publicly disowned any belief in the policy which he is supposed to have persuaded others to accept.
But the most extraordinary thing is the statement attributed to the Chancellor at the Press conference after The Hague meeting. The report in the Financial Times was from its Common Market correspondence. This is a reputable paper, read throughout Europe, and very much wider than that. In it, he said that
the new and directly deflationary measures combined with planned foreign exchange savings, particularly in the military field, would be sufficient to do the job on their own. The prices and incomes part of the package should, therefore, be viewed"—
and then, in inverted commas—
as a bonus on top of it all."—
I rather doubt whether the trade unionists regard this as a bonus—
While the Government meant it to succeed, the Chancellor said, ' we would not be all at sea again if it failed '.
The Chancellor is reported as saying, according to that reputable correspondent, that the wage freeze is not necessary, and that the deflationary policy will do the job on its own. How does he, or the Prime Minister, or the First Secretary, expect to get the co-operation of the whole country in these measures when he says, "We have just thrown them in as a bonus, and we can succeed without them"? That completely undermines the whole basis of the Government's attempts to institute the wage freeze. It undermines their whole policy. It will have a catastrophic effect on the economy and upon all those being asked to cooperate in something which is thoroughly distasteful to them. This is yet another example of the divisions inside the Government. No longer is it a question of one economic Minister or two economic Ministers; we have three different economic Ministers in charge of our affairs.
We read that the Chancellor of the Exchequer has let it be known—which means, I suppose, that he has not yet told the Prime Minister—that he does not wish to go on being Chancellor of the Exchequer. We can well understand that. But he is no longer Chancellor of the Exchequer; the job has been taken over. So we have these open differences between the three major Ministers who deal with economic affairs. How can we expect sterling to gain any more than it has done already, and expect it ever to be strong while these public divisions exist in the Government?
I want to mention briefly the main omissions from the present package. There is nothing to give people incentives; there is nothing to encourage savings; there is nothing to encourage efficiency; there is no promise of economies in Whitehall; there is nothing to encourage investment against great deflationary pressures; there is nothing to encourage exports, except, perhaps, hotels. Here we see a typical example of the Government's contradictory policies. They penalise all the hotels through the Selective Employment Tax, and now propose to set up a bureaucracy to try to make an administrative judgment on how hotels may help to encourage tourism, and to give them a loan.
What a way to try to encourage tourists and hard currency to come into this country! In all these measures and restrictions there is nothing to inspire anyone to greater output or harder work. The long-term disadvantage of all this will be its impact on investment, coinciding, as it probably will in the autumn, with a downs urn in investment anyhow. There will be hardship for families, and particularly for young married couples trying to furnish their homes. The long-term effect of these measures will be to damage investment.
Finally, I want to look to the future. I said that I thought that Wednesday of last week would be a watershed. For the people it could either be disillusionment once again, finding themselves back with a whole series of restrictive measures, worse than have ever been taken before, or a great opportunity to abandon the emotional shibboleths of economic policy, to face our real problems realistically, and to judge policies on their merits.
For the Government there are two alternatives. The first is to go deeper into the siege economy. I know that some hon. Members below the Gangway opposite will argue that this is the right course to take. The other alternative is to take action—and nobody will deny the difficulty of taking it—to move out of the siege economy and on to the open plain of opportunity. I believe that that is the road which we ought to take. [Interruption.] The hon. Member for Penistone (Mr. Mendelson) is so blinded by the siege economy and living in the dark that he cannot see anything else. The real

problem facing the country is that of creating dynamism in the economy, with just on 80 per cent. private enterprise and just over 20 per cent. nationalisation. This problem must be tackled realistically.
The First Secretary says that the alternative is either his incomes policy or mass unemployment. He threw at us the figure of 2 million unemployed on Monday of last week. That choice is absolutely false. It is untrue to say that any Member on this side of the House wants to see mass unemployment, and hon. Members opposite are in no position to criticise unemployment. We ought to have several economic objectives. We must manage a full employment economy and not an over-full employment economy, and we must achieve cost stability and price stability. Far more is involved in that than an incomes policy. We must improve the balance of payments, and maintain the strength of sterling and, as a result, raise the incomes of the most lowly paid.
The obstacles to achieving these are considerable. The first one is overmanning; the second is restrictive practices; and the third is too little competition generally, including too little competition in tariff reductions. The next trouble is low incentives to people in industry at whatever level, and then the mass of distorted Government spending. Then there is inefficient organisation, the subsidisation of the nationalised industries, and regional imbalance.
All these are real obstacles which are facing us, and each must be dealt with by different policies. [HON. MEMBERS: "Tell us yours."] If hon. Members opposite bide their time for a few minutes they will hear my views on these policies. The first thing that we need is not a general emotive cry about unemployment but sound economic measures and the use of skilled economic weapons, which are very wide-ranging indeed. We need a considerable variety of policies to deal with the situation, and a determination to carry them through. It cannot be done by gimmicks and by short cuts. It can only be done by bringing home the real economic facts to the people and the relevance of their policies—[Interruption.]

Mr. Speaker: Order. We cannot argue by noise. Each side will have the opportunity of saying what it thinks.

Mr. Heath: This is what the Prime Minister and his colleagues have completely failed to do—

Mr. J. J. Mendelson: Mr. J. J. Mendelson (Penistone) rose—

Mr. Heath: They have not brought home the real facts of the economic situation, nor have they brought home the relevance of their policies—

Mr. Mendelson: Mr. Mendelson rose—

Mr. Speaker: Order. Hon. Gentlemen must keep their seats if the right hon. Member does not give way.

Mr. Heath: Mr. Heath rose—

Mr. Ivor Richard: Mr. Ivor Richard (Barons Court) rose—

Mr. James Dickens: Mr. James Dickens (Lewisham, West) rose—

Mr. Heath: Over 70 Members wish to speak and I do not intend to give way—[Interruption.]—because the right hon. Gentleman will be winding up and it will not be possible to speak afterwards.
First and foremost, confidence cannot be restored only by the short-term measures which the Government have announced. This is fundamental. They must be combined with a long-term programme, a programme which must concentrate not on the blunt weapons which the right hon. Gentleman has been using, but on the more refined weapons, both in timing and in structure, for dealing with the economy—[Interruption.] I am endeavouring to make a serious contribution, because I do not believe that economic discussion ought to be in the rut of purely restrictionist measures such as the Government have just introduced.
The first thing is to concentrate on more refinement of economic management and the information necessary to back it up. The second is to recognise that over-full employment is menacing to the economy and to everybody else—

Mr. Dickens: Mr. Dickens rose—

Mr. Mendelson: Mr. Mendelson rose—

Mr. Speaker: Order. If hon. Gentlemen cannot contain themselves, I must ask them to leave the Chamber.

Mr. Mendelson: On a point of order. With great respect, it is perfectly normal and traditional to try to intervene after

you, Mr. Speaker, have pointed out that one should not intervene while seated, and ask the right hon. Gentleman to give way. He ought to give way.

Mr. Speaker: It is in order for the hon. Gentleman to seek to intervene. It is also in order for the right hon. Gentleman who has the Floor not to allow him to intervene.

Mr. Heath: The hon. Member for Penistone will not break up this speech, however hard he tries.
The hon. Gentleman's Leader and Prime Minister has just announced to the country that he wants to have 470,000 unemployed, so the hon. Gentleman is in no position to criticise that. Let us recognise, then, the problem of over-full employment and the need, while men are changing their jobs, that there should be this unemployment and that there is a number of things which go with it.
Next, there should be far greater and more imaginative retraining facilities, both for management and for men—

The Prime Minister: I have not interrupted all the other items of the right hon. Gentleman's misstatements because, as he says, this is a debate, but he has just thrown at my hon. Friend the Member for Penistone (Mr. Mendelson) a complete travesty of what I said on Wednesday of last week. Will he now quote—[HON. MEMBERS: "No."] He said that we want to have 470,000 unemployed. Will he now quote the exact words which I used?

Mr. Heath: Of course.
If the figure of unemployment were, after all the re-absorption, after all the redeployment and after the measures for regional distribution, to rise to a figure between 11 and 2 per cent."—
2 per cent. being 470,000—
I do not believe that the House as a whole would consider that unacceptable."—[OFFICIAL REPORT, 20th July, 1966; Vol. 732. c. 646–647.]

Several Hon. Members: Several Hon. Members rose—

Mr. Heath: I want to bring my speech to an end by emphasising the long-term policies which ought to be pursued and which are not being pursued by the Government.
Thirdly, they should aim at a high wage and low-cost economy, with a wide


extension of productivity agreements, the abolition of restrictive practices and overmanning.
Of course, the right hon. Member for Nuneaton is right in his thesis that what one wants is higher wages and higher productivity, but his case would be unanswerable if he could say, "Look at the great union of which I am a leader. See how they are doing this. Look how, every time they have had a wage increase, they have produced a magnificent increase in productivity." When he can say that, he will carry the country with him, but until he does, the bottom falls out of his thesis.
Another feature of this long-term policy is the reorganisation of industrial relations. The Royal Commission set up by the Prime Minister still delays giving answers. The Trades Union Congress has not yet submitted its evidence—

The Prime Minister: It has.

Mr. Heath: It must have done so in the last day or so, because, on my last check, it still had not done so. Fifteen months have now passed before it has submitted its evidence. That is delay and the Prime Minister is doing nothing about it.
Agreements should be enforceable on both sides. With productivity agreements, this becomes more important. This requires to be implemented speedily, with industrial courts and outlawing wildcat strikes. What about restrictive practices being referred to Mr. Aubrey Jones's Board. Let that Board investigate instances of those restrictive practices and bring them to the light of day and let legal action be taken against them if action cannot be taken voluntarily, because this is one of the great obstacles to growth.
Let us have incentives through direct taxation. In a splendid passage at the end of his announcement on Wednesday, the Prime Minister talked about:
The unsung achievements of keen executives … of inventive scientists and creative designers. "—[OFFICIAL REPORT, 20th July, 1966; Vol. 732, c. 638.]

The Prime Minister: Hear, hear.

Mr. Heath: But if they are so keen, and earn more than £5,000 a year, he clamps 10 per cent. on their Surtax straight away. That is the treatment

of the Prime Minister and his colleagues when real initiative is shown in British industry.
The efficiency of the nationalised industries should be improved. The Government have abandoned this principle by what has been done—on the railways, for instance, in their handling of Dr. Beeching's axe, and elsewhere. Instead of reducing the subsidies, they are being increased. What about encouragement to private industry, instead of the constant discouragement which they have had since this Government came into being? We now have worse investment allowances, the Selective Employment Tax and the damaging uncertainty of the Corporation Tax.
Then there is the recasting of the social services. This will be another great shibboleth for the hon. Members below the Gangway—

Mr. Mendelson: If the right hon. Gentleman will allow me—

Mr. Heath: No, I will not. The hon. Member will put this in the same category as the "sacred cow" of unemployment. He will not discuss the social services on their merits, which we have done in the House and which we did throughout the election.
Then, regional policy—

Mr. Norman Buchan: On a point of order. Is it in order for the right hon. Gentleman to refer specifically to one hon. Member of the House and then fail to give way?

Mr. Deputy Speaker (Sir Eric Fletcher): The right hon. Gentleman is not out of order.

Mr. Heath: Another bogus point of order.
The regional policy lost momentum under the First Secretary.
Finally, there is the European policy. The Common Market has now reached agreement over the agricultural policy. Will the Prime Minister now say that he will accept that in order to reach agreement about entry into the European Economic Community? The European policy has lost all momentum under the present Administration, who are divided, and the Prime Minister uncommitted. In any case, we ought to move towards


the levy system in agriculture and give the British farmer a better opportunity in the home markets to reduce our imports.
These are 12 major items of policy, none of which the present Government is following. They are the policies which can restore this country's economy, and restore confidence in this country abroad. But they need to be carried out by people who believe in them and people who, unlike the right hon. Gentleman and his colleagues, are competent to pursue them. The Prime Minister said at the end of his famous telecast, talking to the country as a whole, "We, the country, are under attack". He was quite wrong. It is the Prime Minister who is under attack.
The loss of confidence in this country abroad is a loss of confidence in him, a loss of confidence in his colleagues, the First Secretary and the Chancellor, a loss of confidence because of their incompetence. That is why we are censuring them today.

Hon. Members: Hear, hear.

4.30 p.m.

The Chancellor of the Exchequer (Mr. James Callaghan): The somewhat forced cheers which greeted the end of the speech of the right hon. Gentleman the Leader of the Opposition bore all the semblance of what I remember happened when we were ordered to give three cheers for a visiting dignitary to one of Her Majesty's ships. The order was given "off caps" and we all cheered from the heart. The cheers sounded very much like those which greeted the conclusion of the right hon. Gentleman's speech.
I will pick up some of the points raised by the right hon. Gentleman and I will gladly give way to him if he thinks that there are some which I have missed on the way through. The first point I wish to emphasise, for it should be emphasised in this debate, is that the series of severe measures proposed and introduced by the Government during the past week will carry this country's overseas accounts back into balance and should produce a surplus in 1967 as a whole.
As a result of these measures, the country can look forward to putting an

end to the series of deficits which, year by year, we have incurred since 1963. As the House knows, these deficits reached a peak in 1964. Thereafter, as a result of deliberate Government action, the deficit in 1965 was £400 million smaller than in the previous year. It was the intention of the Government to reduce the deficit to nil by the end of the current year, but it had become clear that we were not making sufficient progress towards that goal. Hence, the necessity for the new measures which have now been introduced.
In addition, there are special short-term factors which have had an adverse influence on our progress. We are having to pay much higher prices for imported commodities, and this has the effect of swelling our import bill. Import prices have risen sharply in recent months: in the three months from March to May they were 2 per cent. above the previous three months. That 2 per cent. increase, for that one quarter, compares with an increase of less than 1 per cent. per annum throughout the whole of 1960–65. The price of copper has caught the headlines, but, for a number of reasons, including the Vietnam war, prices of other basic materials have also climbed. The effect of the rise in import prices in the first five months of this year would be to add to the country's import bill at an annual rate of over £100 million a year. Further, as the House knows, both our trading position and confidence in sterling was adversely affected by the seamen's strike. The size of the reserves loss in June had an adverse impact on the markets.
As for the longer-term reasons why we are not progressing towards the goal we had set ourselves on the balance of payments, there has been the continuing pressure of demand at home. This has increased for a number of reasons. First, and mainly, demand has remained high because of the renewed strength in consumer spending; and this has been the result of large increases in money incomes. A further factor has been that the growth in the productive capacity of the nation has slowed down significantly because of the substantial fall in actual working hours that has accompanied the move to a 40-hour week. Actual hours worked in manufacturing appear to have fallen by about 2 per cent. between the


first quarter of 1965 and the first quarter of 1966. This offset, indeed disguised, the increase in productivity per man-hour that has been taking place. For example, over the same period, output per operative hour in manufacturing rose by 3½ per cent.
The figures of consumer spending in the first quarter have lately become available and they suggest that pre-Budget buying was quite as high as I and others had anticipated. Indeed, expenditure in total was up by 21 per cent. in real terms over the fourth quarter of last year. I had anticipated that as a result of the hire-purchase controls which were tightened up by the Government as recently as February of this year, shortly before the General Election, and of the reaffirmation of the credit restraint policy combined with pre-Budget buying, there would have been a fall-off in demand in the second quarter of this year. Indeed, the Budget estimates were based on this.
The Government were publicly warned in the spring by independent observers, though not by all—the view was not universally expressed, though, nevertheless, a warning was given to the Government—of the real dangers of taking further measures at that time to deflate the economy. I said that the view was not universally shared. The Leader of the Opposition, for example, expressed some doubts. not about the total deflationary effect of the Budget, but about its timing. However, despite his view—and he was right—even he did not have the prescience to foresee the rise in import prices or the seamen's strike. Indeed, he would have been a remarkable man had he done so. Suffice it to say that many people believed, and wrongly, at that time, that it would have been dangerous to have depressed the economy into a downward decline.
Preliminary indications are that although there has been something of a slowing down in demand and activity in the second quarter, this has not been as pronounced as earlier seemed likely. In the first half of this year unemployment was running at an average level of 1·2 per cent. The prime cause of the continuing buoyancy of consumer spending and the continuing high pressure on resources has been the rise in money incomes. They have gone on increasing at

a rate much in excess of the increase in national productivity. As a result of all the factors I have mentioned, our trade balance showed insufficient signs of improvement—and it became clear that there was no prospect of achieving the aim of balance by the end of 1966.
As we could not afford to continue indefinitely the process of incurring new debts, additional measures became necessary to enable us to pay our way. I emphasise and re-emphasise this, because there sometimes seems a willingness to overlook the obvious—that we are not paying our way—and to search for some other reason outside of these islands and outside of ourselves. There is no doubt that we in these islands are particularly exposed to international gusts of confidence and changes in interest rates throughout the world, because sterling is today so largely used by the world as a trading currency, and that is as important as its status as a reserve currency. But basically, in the long run, it is within the nation's power to control this situation by maintaining a strong balance of payments position.
The measures announced by the Prime Minister last Wednesday have that purpose, and they fall into two parts. There are the proposals designed to lessen the pressure of demand at home and the measures for the reduction of our expenditure overseas. I will deal with the second issue first. Expenditure overseas by both the Government and private persons has increased substantially in the last few years. First, there is the tourist allowance and emigrants' remittances. Since 1959 our tourist expenditure overseas has been rising by about £20 million a year, and this increase seemed likely to continue. We have therefore taken direct action to reduce the tourist allowance for the 12 months starting from 1st November, 1966. The reduction in the tourist allowance to £50, together with the tightening of the provisions for emigrants' remittances and gifts, will save up to £50 million a year.
The right hon. Gentleman complained about it. Clearly, as he says, his duty is to the nation and not to the Government, but the nation might have been a little clearer about his attitude if he had said whether he agreed with it. Would he have reduced the tourist allowance or not? After all, when he tells us that he


is going to give us guidance on these measures, he might at least have expressed a clear view on this expenditure. But he failed to do so, as he did on a number of other matters. A substantial sum can be saved by this reduction, and I am sure that it will be accepted by the nation as justified in the present circumstances.
As regards Government expenditure overseas, the total for military purposes, aid, representation, subscriptions to international organisations and all the other forms of Government expenditure amounted in 1965 to over £500 million. That is a very heavy claim on our total resources, whether measured against our national product or by our external expenditure. The largest item is the cost of stationing troops abroad, and the second major item comprises loans and aid and our contributions to international organisations. As the House knows, the Government have decided that this total must be cut, and the decisions that have been taken will save £100 million in overseas payments in the financial year 196768 as compared with the current year.
Many of these reductions do not relate to matters wholly within our control. There must be consultations with those concerned at home and overseas, and therefore I should prefer to decline the invitation to give an exact breakdown of how these sums are made up. That could be counter-productive in the circumstances. But a significant part of the savings will flow from rephasing and speeding up the policies announced in detail at the time of the Defence Review. As a result of the changing situation in the Far East, given the end of confrontation, we expect to accelerate by more than 12 months the decisions that have been taken, and this will produce significant savings in overseas expenditure.
On the question of our troops in Germany, I met Dr. Dahlgrün, the German Minister of Finance, and the communiqué which was issued after our meeting gave a clear indication of the course of our discussions. The foreign exchange costs of British forces in Germany are now about £94 million a year. This includes the exchange cost of not only our troops but their dependants, who outnumber the troops, and the

German civilians who are employed to service our forces there.
I made clear to Dr. Dahlgrün that in our present situation, and given the additional burdens that were being imposed upon the British people, these costs would have to be covered in full by one means or another. If, therefore, it were the considered view of the German Federal Government that they were unable to cover these costs by the various means open to them, we shall propose through the prescribed procedures a reduction in the size of the British Forces in Germany. We now await the next move by the German Government, which I expect in a matter of weeks.
The right hon. Gentleman asked why we did not propose that there should be a N.A.T.O. burden-sharing exercise. 1 thought that that was not a very helpful question if the right hon. Gentleman was as anxious to save overseas Government expenditure as we are, because this is an argument that is often advanced by other members of N.A.T.O. He has picked up their argument and is using it against the Government. There is one overwhelming reason why it would be desperately unfair to the British people that we should adopt and accept such an exercise. It is that we as a member of N.A.T.O. have carried greater burdens throughout the rest of the world than any other member of that organisation.
My view and that of the Government is that if we are going to work out the relative foreign exchange costs of troops maintained overseas in helping to keep the peace of the world, our total costs should be taken into account, and not merely those in Germany. When those total costs are taken into account, it will be found, as I have said in the House before, that the proportion of G.N.P. we pay across the exchanges for military purposes is greater than that of any other nation. That is the answer to the right hon. Gentleman, and that is why I hope that he will not encourage those who would be very ready to take up this argument in trying to restrict it to N.A.T.O. That clearly could not be advantageous, nor would it represent the burdens which we are carrying in other parts of the world.
I now turn to our domestic measures. In the five months before the seamen's


strike, exports were 9 per cent. up compared with the same period last year. Nevertheless, we need to ensure that exports go on rising steadily, and, therefore, part of our measures are designed to reduce the pressure of demand at home and so release more goods for export. Generally speaking, it is not true that our goods are overpriced in foreign markets. But there are major difficulties over delivery dates, and so long as capacity in sections of our industry is fully stretched there is an inevitable tendency for export orders to be held up. Delivery dates are still too long for plant and machinery which is wanted either for export itself or to produce goods needed for export, and skilled labour is in many places at a premium.
One of the consequences of easing the pressure of demand at home will be that our exports will get a freer run. At the present time, we are dealing with a situation in which taking the country as a whole there is a labour shortage, especially of skilled men. Reducing the pressure of demand should ensure that labour shortages will no longer frustrate the export drive or produce such lengthy delivery dates.
The House knows the measures taken to achieve this by curtailing both private and public spending at home. On private consumption, there are the hire purchase restrictions, tighter building controls, the increase in Purchase Tax as part of the regulator which covers also oil and alcohol, and there are also the measures in the public sector to which I shall come later. This range of disinflationary measures, combined with our overseas savings, will produce the substantial improvement in our balance of payments that we need. I shall repeat that, because I want to come back to the headline in the Financial Times, which was a rather circumscribed version of what I was saying—others have also suffered that fate. The range of disinflationary measures which we have taken, coupled with the overseas savings, would in themselves produce the substantial improvement in our balance of payments which is necessary to get rid of the deficit.
But we do not and cannot rely solely on this range of meaures. It is not enough just to reach a bare balance in our foreign payments. We must have a surplus wipe the slate clean of past

foreign debt. We must use the period of disinflation upon which we are now entering to put our competitive position on a sound footing for the long run. We must stop the process under which our whole cost structure is inflated, year by year, by a push on money incomes that goes on almost independently of the pressure on the economy.
We are therefore taking immediate action on this front, just as much as on the side of demand, in order to stop "costpush". Hence, the prices and incomes standstill is an essential, indeed crucial, element in the totality of our measures to get the economy right. My right hon. Friend the First Secretary will deal with this in greater detail when he comes to speak tomorrow night, if he is allowed to by hon. Gentlemen opposite who have made a habit of interrupting him whenever he has wound up in the past. But he is well able to look after himself.
I believe that there is widespread recognition throughout the country of the need for a temporary standstill in incomes. Incomes of all sorts have been going up too fast in recent years, pushing up prices with them. Now we must have a breathing space. We can find all sorts of long-term remedies which will take effect over the course of some years —the right hon. Gentleman produced some this afternoon, most of which are already in operation, and the work is going on—but we need at this moment a breathing space in order to restore the competitive position of our economy. Hence the case for a prices and wages standstill to enable us to achieve this end.
Will this be accepted? We have tried to create the social conditions in which it can be accepted as fair. I do not wish to rub salt into old wounds, but at least we did not reduce Surtax at a moment when we denied the nurses an increase in pay. We have attempted to ensure, through the Capital Gains Tax, that where uncovenanted benefits are secured there should be a measure of return to the Exchequer of the gain which has resulted from them. We have attempted, through the operation of the Prices and Incomes Board, to ensure that there is greater fairness in the distribution of incomes. These things are not perfect, and are unlikely to be for some


time, but the conditions are there to make it possible for people in this country—and that means hon. Members opposite and their friends as well as Members on this side of the House—to accept restraint on all incomes in order that we may both achieve social justice and ensure the competitive nature of our economy which we want to ensure during this deflationary period.
Details were given yesterday by the Chief Secretary to the Treasury of the intended savings in central and local government activity. As regards roads, we are securing a reduction in the planned rate of increase in our expenditure, but there will be a continued development of our plans for the road programme as a whole, including projects of high priority on economic grounds such as the movement of goods. Capital expenditure by local authorities designed to improve local amenities will be postponed also. Much though we should all like to see such spending go ahead, I do not think that anyone would argue that in existing circumstances we should let it continue. There will also be a saving on building projects carried out by the Ministry of Public Building and Works on behalf of Government Departments, as well as expenditure by local authorities. Details of reductions in investment by the nationalised industries were given by the Chief Secretary yesterday, and an appraisal has shown that these reductions are practical without damaging essential investment. The full details are being worked out in conjunction with the chairmen of the nationalised industries.
As the Prime Minister announced, the total effect of all the new measures will be to reduce demand in real terms by over £500 million in 1967, in addition to the effect of the Selective Employment Tax, and this calculation allows for offsets of savings, for timing factors and for diversion of expenditure from foreign to home sources.
As regards the increase in the price level which will result from these measures, it is estimated that they will raise the Index of Retail Prices by rather less than 1 per cent.
Inevitably, on the introduction of a series of measures of this kind, criticisms

and suggestions are made from both sides of the Chamber advocating the substitution of other measures for the ones which have been selected. One proposal is that we should introduce import quotas. These are permitted only as a temporary remedy, and we have already used the import charge in substitution for them on the ground that it is a better temporary instrument. If Britain were to introduce quotas in these circumstances, they would be badly received by our trading partners and could provoke retaliation. The E.F.T.A. countries would undoubtedly take it amiss in view of the fact that, at the beginning of 1967, tariffs between the E.F.T.A. countries and ourselves—we are part of E.F.T.A.—tariffs between E.F.T.A. countries are to disappear finally. From then on, British industry will be able to look, in effect, to a domestic market of 100 million people enjoying an average income per head which is among the highest in the world.
Moreover—it is important to remember this—there is no soft option here. Quotas would not remove the need for disinflationary action. Such action would still be necessary to offset the effect of quotas in reducing the flow of supplies available to the economy. The Government, therefore, ruled out quotas as an appropriate instrument for dealing with our situation.
Another proposal is that we should further tighten controls over the export of capital. It has been a complaint against me from the other side of the House that we have tightened control over capital too much. I do not accept that. Neither would I accept that it would be right to carry this process further at the present time. As regards the non-sterling area, control over capital exports is complete. Companies are pressed into borrowing locally as far as they can raise what capital they need. They are urged to review all the possibilities they can find of securing resources outside this country, and it is very rare indeed for a company investing in the non-sterling area to receive the facilities of the exchange market at the normal rate of 2·79.
As regards the sterling area, the Voluntary Programme was willingly accepted by the overwhelming proportion of British industry which I approached at the time


of the Budget. There had been a very substantial drain of capital out of the country before the Budget. This has gone on in the second quarter. The Budget was introduced in May, and during the month of April there was still a drain, but since then the Bank of England has examined all the proposals for expenditure overseas of the 200 companies which have been asked to cooperate. The Bank has allowed those which it thinks proper, that is, those which are remunerative in our short-term as well as our long-term interest, and is disallowing others.
I do not myself believe that it would be advantageous in the long run or, indeed, in the short run to tighten this control any further. It has been willingly received. It is certainly being observed at the present time by those who come under it. In any case, it would be shortsighted to frustrate completely, even in present circumstances, the export of capital. A balance must be drawn. I have tried to strike that balance by reforming the tax system and by the voluntary measures of control, as well as exchange control, which have been introduced. We ought to be careful where we draw the line so as to get the maximum advantage for ourselves, and that is where the line is drawn at present.
Another problem—it is not a problem; it is a human heartache—is the level of unemployment. I do not know whether this is to become a party shuttlecock or not, but the fact is that nearly everyone in this country is deeply committed to maintaining a high level of employment. Unemployment in the first half of this year, at 1·2 per cent., was at the lowest level for ten years. By way of comparison—I give it only by way of comparison, because people have their minds clear about the period of which I am talking—in the third quarter of 1964, when the last Government went out of office and we came in, a time when, taking the country as a whole, there was what was generally regarded as full employment, although not in some regions, the percentage was 1·6. The average for the years 1959–64, which I admit, takes in the bad year 1962–63, was just over 1·8 per cent.
The best estimate which can be made was the one made by the Prime Minister

in the announcement he gave last week. If the level of unemployment which resulted were—and could be—spread evenly around the country, it would be almost unnoticed, and it would in fact represent little more than the movement of men between jobs. It is when this unemployment is concentrated in particular areas that it becomes intolerable. This is what happened in 1961–62–63, when there were startling contrasts between region and region which affronted the conscience of ordinary citizens everywhere in the country.
Since then, policies have been followed which have had the effect of strengthening the economy of some of the weaker regions and restructuring some of their industries. The selective policies of the present Government have resulted in deliberate regional advantages being given to areas where unemployment is higher than average—by way of new factories, preferential credit terms, additional access to the Public Works Loan Board, and in other ways. The purpose of Government measures has been to strengthen the economy of the regions, and it is the Government's aim that the disinflationary effect of our policies should be more evenly spread over the country than it has been in the past.
Moreover, the Government's social policies mean that the wage-related benefits for the unemployed, the supplementary benefits for the unemployed, as well as for the widows and the sick, will be coming into force this autumn. These will provide at least half take-home pay for the man on average earnings—and a good deal more than that if he has dependants—for up to six months. Then there is the Redundancy Payments Scheme, covering most workers, which has recently come into operation throughout the country. The right hon. Gentleman also asked us to get on with retraining—and we have. In the current year there are 6,000 places in training centres, compared with 2,750 in 1961. By the end of 1967 the total number of centres that will be in existence will be able to turn out 15,000 trained men a year, from some 8,000 places. On 1st April last, labour training schemes for new firms in development districts were improved; and since 1st July instructors from the Ministry of Labour have been available to train semiskilled operatives on their own premises.


In addition, of course, the new industrial training boards for retraining now cover some 10 million workers—

Mr. Sandys: Mr. Sandys (Streatham) rose—

Mr. Callaghan: I will gladly give way in a moment, but I want to make the point that in relation to the areas that are at the top of our minds—Scotland, Wales, the North-East, the North-West—there has since 1962 been a substantial transformation in the scene that has resulted in these economies being much stronger than they were at that time.

Mr. Sandys: I thank the right hon. Gentleman for giving way. This is a very interesting lecture, but when does he propose to answer the charge of gross incompetence contained in the Motion?

Mr. Callaghan: My whole speech is an answer to that. [HON. MEMBERS: Oh."] The best answer to abuse is to give the facts. It is the facts that will stand and will speak. It is these long-term policies I am now describing which the right hon. Gentleman's nominal leader, the right hon. Member for Bexley, was attempting to depict. It is those that I am saying are now in operation and are being worked out. It may be that the right hon. Gentleman does not think as much of the long-term proposals as his right hon. Friend, but the fact remains that these long-term measures go on quietly. They are no remedy for the short-term position, but they are essential to acquiring the healthy growth of the economy we all want to get back to as soon as possible—

Mr. Cranley Onslow: Mr. Cranley Onslow (Working) rose—

Mr. Callaghan: No. I have just answered the right hon. Member for Streatham (Mr. Sandys), and I will not give way again now. I will pursue my argument for a little while.
I turn to the next question that is of importance in this context, and the right hon. Gentleman must see its relevance. I do not quite follow his point. We are discussing a situation in which disinflation is overtaking the country. It therefore seems to be absolutely vital in regard to such human problems as unemployment, which are of very great concern to everyone in the House and everyone in the country, that we should ensure

that the burden of unemployment does not fall, as it has done in the past, on regions and persons unable to accept it or tolerate it because of its concentration. This is surely very relevant to the period on which we are about to embark.
I come back to the same point again. We have chosen, and it is right—indeed, it is necessary so to choose—the getting into balance and then into surplus with our balance of payments as being the first preoccupation of the country at the present time. But it is not the only one. The maintenance of a high level of employment must also be an aim of national policy, as must healthy expansion, and it is the underlying measures of the Government that I have been describing, particularly in connection with the regions, that will ensure that we can, in due course, resume the policy that is necessary.
I should like now to take up one or two or more of the points made by the right hon. Gentleman the Leader of the Opposition. It is not true that during the election we failed to warn the country of the situation—[HON. MEMBERS: "Oh."]—the right hon. Gentleman has "election" right at the top of his mind. He kept on referring to it, and he no doubt bitterly regrets having lost the last one, but if he wants to swop quotations I would refer him to our manifesto, which stated:
There is no easy way ahead—and only the dishonest would pretend that there is. We do not believe that the British people want to be lulled with the message that ' all is well ' and that they have ' never had it so good '. Nor do we think that they expected or wanted their Government to present a give-away Budget on the eve of a general election. We have not done so. And we shall take whatever further steps are necessary even if they are unpopular, to achieve the rate of progress that we need.
We are facing the facts—as they should have been faced in the 13 years of Tory rule".
The right hon. Gentleman made great play with the strength of sterling. I do not think that he went unduly far, but I thought that he went quite as far as was necessary, on this occasion, because this is not a simple matter of scoring party points. If it were, I could tell the right hon. Gentleman where the rate for sterling was in the months immediately preceding the 1964 Election—yes, and why it was there—but I do not think that we should push this problem at each


other across the Floor of the House, nor try to prove that because the rate for sterling is down or up this implies that the policies of one Government are necessarily better than those of another. If it did, I can only say that our policies today are undoubtedly better than those of the Tories in the summer of 1964.
Maybe that is not saying much, but when the right hon. Gentleman says that we had in this last week exploded every myth and destroyed every illusion of the Left, it seems an astonishing statement from someone who left behind the biggest deficit we have ever had. It is—and the right hon. Gentleman the Member for Barnet (Mr. Maudling) knows this—the continuing weakening of the economy that resulted from our failure to balance our payments over so many years that has resulted in the rundown of our reserves and in the attempt now to climb out of that situation—and it is an attempt that should have, and needs, the support of the whole nation.
The right hon. Gentleman has been speaking on this subject with two voices. He says that he warned the country of the situation. He did, in some speeches, but he and his right hon. Friends were also proposing at the same time other measures that would have had a substantial inflationary effect. It was in the Conservative manifesto that we were told that there were to be half a million houses by 1968. 1 hope that that statement will not be denied, because I have the manifesto here.
It was in his broadcast that the right hon. Gentleman told the nation that he would go on with another aircraft carrier, and that his spending on defence would certainly be greater than the £2,000 million which was the target the Labour Government had laid down. I have the text of that broadcast here, too. It was the right hon. Gentleman himself, together with his hon. Friends, who proposed in their manifesto, an increase in social services expenditure of over £800 million. Oh, yes—he warned the nation all right, but the warnings were muted on occasions when he wanted to tell the nation of all the other things he proposed to do.
The right hon. Gentleman accuses me of having risked the situation by leaving it to the autumn—[HON. MEMBERS: "Gamble."] Yes, he used the word "gamble". The country will have to

decide whether this was a reasonable risk to take in the light of the circumstances. I have no doubt that the Opposition will say "No", but it is what the country says that matters. There was strong pressure at the time from industrialists and others who felt that the economy was on the point of turning down. There was no doubt that the Selective Employment Tax would have a substantial effect in the autumn. I thought it was right, and I still think it was right, to take the risk of not depressing the economy at a time when there was so much uncertainty, in the light of the destruction which had gone on before when no risk was taken at all. I certainly do not accept the view that because we leave these measures over they therefore have to be bigger. That is certainly not so.
The existing situation results from the factors I have outlined: increased prices of commodities, the seamen's strike and other matters of that sort. [An HON. MEMBER: "No."] The hon. Member says "No", but I cannot see how he can possibly argue the contrary, or how an extra £100 million for imports of raw materials can possibly not have an effect on the balance of payments in 1967.

Mr. Onslow: Does the Chancellor understand that the question which he has to answer is whether he foresaw this crisis or not? If he foresaw it, by his own words he is condemned as dishonestly concealing it. If he did not foresee it, he is condemned in the eyes of the House as being utterly incompetent.

Mr. Callaghan: I thought I was wrong to give way, and clearly I was, because that was not a point of interrogation, nor was the hon. Member seeking information. He was expressing an opinion which he should have reserved until later in the debate. I would answer the question in this way. It was not possible to foresee all these matters which have flowed during the last few months. No one could have foreseen the seamen's strike or the uplift in import prices of commodities. What could have been foreseen, and was foreseen, was that the economy was very much in balance at the end of the first quarter of 1966 and therefore a decision had to be taken between the two issues of deflating immediately in May or leaving it until the autumn.

Mr. Stratton Mills: Mr. Stratton Mills (Belfast, North) rose—

Mr. Callaghan: No, I shall not give way at the moment.
It has not been possible to leave it until the autumn. I regret this and wish it had been. I am sure that every industrialist in the country shares my view, but I think there comes a moment, and the Government have taken their decision at that moment, when it is necessary to restrain home demand to ensure that our payments are brought into balance again. This was the right and proper thing to do, and we have done it.
As to differences which are supposed to exist between us on economic policy, the right hon. Member spoke of them so familiarly that I wondered whether he and the right hon. Member for Barnet had been having recent conversations, because we all know of the differences of this sort between them in Government —I speak of nothing afterwards—on economic policy of this sort. I do not accept that the right hon. Member was saying anything new at all in the measures he put forward. The proposals he made were a series of cliches and generalities. They were cloudy and imprecise when he was speaking of something positive. When he was speaking of something negative I quite agree that he was absolutely clear and dogmatic.
I know that the right hon. Member has to try hard. Everyone recognises the difficulty of the economic situation when a nation is not paying its way and everyone knows the difficult choices which confront the nation. As to the question of confidence, I say only this. I do not expect the right hon. Member to have much confidence, but his view is not shared by others. I was at the meeting of Finance Ministers yesterday. I dare-say the right hon. Member has seen the communiqué. The Ministers attending the Group of Ten expressed full support for and sympathy with the action taken and expressed their confidence in the determination of the British Government to carry the measures through and thereby achieve their aim. I somehow think that that view is a little less partial than that of right hon. Ministers opposite.
Whatever measures we take, there is no doubt at all in my mind that this Government retain the confidence of the

people of this country. If there is one thing which is absolutely clear it is that the Opposition, and especially their leader, have no confidence whatever in the minds of the country.

5.15 p.m.

Mr. J. Grimond: The Chancellor of the Exchequer appears to attribute the recent crisis to bad luck. I believe that so long as we attribute our crises to bad luck so long shall we go on having them. It is fatal to give the people of this country the impression that their economic troubles are either due to bad luck or to the ill-will of foreign bankers.
Let us look at the two matters which the Chancellor cited as being responsible for the drastic measures of the last two weeks. One was the seamen's strike. I do not believe anyone thought the seamen's strike was anything more than a possibly precipitating element in an already dangerous situation. Indeed, I should have thought that the Government would have foreseen the possibility of a seamen's strike. Many people knew that there was acute danger of such a strike and it was widely put about that it was part of the Government's plan with their incomes policy that such a claim as the seamen put in should be resisted. But now we are told that it came as a complete shock to the Chancellor of the Exchequer.
The other factor which he claimed threw him off course after his Budget was a rise in import prices. I shall be grateful to the Chancellor if he will give me a moment's attention while I ask him this question. If it is true that the economy is plunged into a crisis by a move of this sort in import prices, what chance has the National Plan of having any relevance for the future? How shall we remain in the field as an international banker financing a large amount of world trade if we are constantly completely thrown into disarray with changes of this kind outside our control?
Surely the point of this debate is that the crises of this country since the war have been continuous. They have come round again with monotonous regularity, are coming round rather quicker than they did and we are taking longer to get out of them and not recovering to the position we held before. If the country


is to he told by the Chancellor of the Exchequer that all we need is better luck, I regard the future as desperate.

Mr. R. T. Paget: Is not the particular price rise which is causing the trouble one which was caused a; a result of Rhodesian sanctions?

Mr. Grimond: I am not sure that I followed that point. It was not the Chancellor's argument that it was within our control but that it was outwith our control.
The measures taken last week, coming on top of the measures in the Budget, are in my view in grave danger of pushing this country into a recession next winter at the time when world trade in general may be turning down. I believe the situation today is much more difficult than it was even four or five years ago. It is admittedly more difficult to stop or postpone capital projects today because they are much bigger in scale and companies have learned from the losses they suffer by chopping and changing. But once we have got into a recession nowadays it may be equally difficult to start up again.
I heard nothing in the Chancellor's speech which would give me more confidence that the assessment he has now made of the amount to be taken out of the economy is any more right than the assessment he made only a month or two ago.
I think it quite extraordinary, if it is true, that he should go into the Continent of Europe and say that this incomes freeze is not necessary. I sometimes think the Government have forgotten about the telephone and have an idea that things said on the Continent will not be repeated at home. He is reported as saying that it would be a "bonus on top of it all". If I had a wage claim agreement repudiated and read that the Chancellor considers this only "a bonus on top of it all", I should be in a pretty ill-tempered frame of mind. I cannot believe that the Chancellor can really expect to get his incomes freeze if those sort of remarks are made about it.

Mr. Callaghan: I realise that the right hon. Gentleman wrote his speech before he heard what I had to say today, but surely he will deal with the point I

made. Does he not accept it as being perfectly valid?

Mr. Grimond: I shall deal with that point, but the right hon. Gentleman has also stated that the incomes freeze is a bonus. I am entitled to deal with that point. I am entitled to ask what is the position of the various pay claims that workers understood they were to get. What is the position of the railwaymen's claim which has, I understand, the backing of the Prime Minister?
The other point made by the Chancellor is that he expects the country to be out of the "red ", I understand, by the end of next year. He said that the fact that we must have a breathing space is irrelevant. The term "breathing space" has a familiar ring. I suppose that it is Labour language for "pause", and we have tried a pause before. The Chancellor says that the difference is that this time the pause is associated with social justice. It remains to be seen whether that makes a great deal of difference to the way it is received. But there is a certain amount to be said for example. For the purpose of example, is it good that at least two Ministers have been given flats free of rent and repairs, rates or tax, at a time when the Chancellor is asking for a pause?
What is going to happen when the pause is over? Are the postponed wage-claims to be met? What are we to have at the end of the six months? Is it thought that a breathing-space will cure the economy any more than the breathing space of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) put the economy on the right lines? What was extremely noticeable in the Chancellor's speech was the absence still of any positive suggestions for the future, other than the shake-out of labour and the speeding up of cuts in overseas obligations which were going to happen some time anyway.
Let us look at the shake-out of labour. I was going to ask whether it was true that there would be only 35,000 places for retraining next year. But I understand that even that figure would be an exaggeration. There are to be very much fewer. I understand that the right hon. Gentleman took pride in saying that we were to have 20,000 places, or whatever the figure was, for retraining—and this at


a time when we may have 500,000 unemployed. If these measures satisfy the Government in the redeployment of labour I am aghast. They certainly will not help the economy to re-deploy labour.
It is no good spending time attacking the record of the Government because, clearly, their record stands on its own and nothing could be more damaging to their reputation than the infliction on the economy of exactly the same sort of ragbag of measures that we had from the Conservative Governments during the last two or three crises. There is no new strategy in the Government's thinking; no new method has been set before the nation; no fundamental decisions have been taken.
Two of the most fundamental decisions that we have to take are, first, to make far more drastic cuts in our military obligations east of Suez. This means rethinking our role and not merely trying to fulfil the same commitments with fewer troops. Secondly, we have to make a determined effort to get some of the weight of sustaining an international currency off our shoulders and at the same time steps must be taken to get more liquidity in the world. If ever there was an epitaph on the present policy it was spoken by the Prime Minister in the debate on the Address in November 1964. He said:
 … we have learnt the hard way that deflation and contraction, so far from making us more efficient and competitive, have the opposite effect—costs rise; essential investment is discouraged; restrictive attitudes on both sides of industry are encouraged; a policy which relates incomes to expanding production is made infinitely harder to achieve."—[OFFICIAL REPORT, 3rd November, 1964; Vol. 701, c. 79.]
That is the Prime Minister's view of what is now his own policy.
If I am told that the Government's policy differs from the Conservative Government's policy because development areas are not to be badly affected then I accept that small crumb of mercy. But who will build factories in development areas in the present economic atmosphere? The Selective Employment Tax will also do far more damage in these areas than many of the positive measures of the Government.
The Chancellor should also remember, in talking about bad luck, that the ill-thought-out nature of his fiscal proposals, both the Selective Employment Tax and

the Corporation Tax, have diverted a considerable proportion of extremely scarce skilled labour into the totally unproductive purposes either of advising companies as to what the tax is thought to mean or providing new staff for the Inland Revenue.
Of course we must hope that these new measures will succeed in the purpose they are supposed to achieve. But if they do succeed they will lead to deflation and unemployment. It should be made clear that if they do not lead to deflation and unemployment the policy will have failed. What I suspect has happened up to now is that the Government's popularity has been largely based upon the failure of their policy. If the policy succeeds, I do not think their popularity will last.
Once again we are buying time. That phrase was used in 1964, when the Government came to office. Since then we have failed to use the time bought. We have failed to find new methods of keeping the economy in balance. We have failed to take fundamental decisions. One of the causes of this failure is that the Government have never explained what they expect to provide the driving force of the economy. If it is Socialism, let them tell us so, but I do not believe that they will. I do not believe that all the "Neddies" and commissions, committees, pronouncement and estimates and plans will make anyone work harder.
I do not believe that anyone will increase productivity to please "neddy Taxation has steadily risen and there is always, running through Government statements, the feeling that success is rather to be despised and that profits are only worth while if they are very small and "socially justifiable" whatever that means. If we are to run a free enterprise economy we have to realise that the mainspring is not only profits but the belief that people who work hard and do good work should get higher rewards.
What is there to go for in modern Britain? All sorts of things, but none of them provided by the Government. The failure lies in the basic outlook of the Government, who cannot make up their minds whether they believe in a free enterprise economy or whether they have anything else to offer. I cannot believe that one can have a free enterprise economy and a wage freeze. One cannot start, as the Government tried,


by holding down rewards and then expecting productivity to rise. I accept that one can have an incomes policy in a sense that one hopes to relate rewards to productivity and to penalise those who are not successful and who do not deserve it, but to get that one has also to reward efficiency.
I therefore make some practical suggestions as to how the Government can increase productivity, which is surely what we all want. Let the Government first of all ask all works councils to meet and put forward schemes for increasing productivity within the months—the period of the pay pause. Let these councils report their findings to their local "Neddies". [An HON. MEMBER: "The right hon. gentleman does not believe in them. I do not believe that people will work for "Neddies", but they may have other uses. Let the Government make it clear that, where such schemes show that increased productivity will be achieved, the Government, so far from holding back the wages of those involved, will encourage agreements such as that which was introduced at Fawley and which allow rises in wages in return for increased production and the end of restrictive practices.
Then let us take measures to increase competition. We should give the Registrar of the Restrictive Practices Court the right to bring before the court cases in which either management or labour, or both, have conspired, so to speak, to forbid the introduction of new machinery, or to hold up measures clearly in the public interest. Furthermore, let us give the court some sanctions to employ against restrictive practices on either side of industry.
Then let us look at the taxation system. If we believe in a free enterprise system, we cannot go on increasing the rate of direct taxation particularly at levels where it becomes an important factor in whether a man is prepared to move his job and to take on a new job for the sake of extra employment, but probably finds that the extra taxation is so much that he prefers to remain where he is. I do not know how far we could remove taxation from overtime, but, combined with some tough measures to increase competition, that might be possible, too.
Then we have to consider holding down the size of the Civil Service. If

the Government are anxious through their Selective Employment Tax to put people into productive employment, surely they should look at their own offices. Many Civil Service Departments and some of the nationalised industries could perfectly well be given a direction to get rid of 5 per cent. or 10 per cent. of their staff, which might result in much more than all the Selective Employment Tax will result in, with all its wasted labour.
To increase exports the Government could do something directly by raising the status of trade attaches at embassies, to see that they were much better trained for their jobs, and that their line of promotion was in industry and not through the Foreign Service. It is quite a different job from being an ambassador. These attaches should be seconded from industry as first-rate salesmen who should go on behaving as salesmen when in the embassies and not be afraid to go out knocking on doors and pushing British goods in the world markets.
I am told that every other major exporting country has far more power from its Government behind its export drive than we do. I am told that the Dollar Export Council has an annual budget of only £30,000 a year. Every other country is spending out of all proportion to our expenditure and if even a tiny proportion of the export earnings went back through the Government into export promotion, that would be direct help to righting our balance of trade. Let us not be afraid to act commercially.
Let us see how much import saving we can make by encouraging the expansion of agriculture. There is still scope for more food to be grown in this country, thereby saving imports.
I turn finally to the east of Suez business. It is impossible to avoid the conclusion that one of the country's major long-term recurring disadvantages is the attempt to maintain a role in the Far East which is quite outside our capability. I notice that this subject was not mentioned by the Leader of the Opposition, but I find it difficult to believe, whatever is done at home, that we will get the country into long-term balance when it is trying to play a role in the world which no other country of its size attempts and which has very little value in today's world.
When these measures were first before the House, my complaint was that they were negative and restrictive. I still think that they are negative and restrictive. I still see no sign of any measures beyond next January which can give anyone any confidence that the country will pull itself out of its difficulties and set off on the course of expansion.
I do not believe that in this country we can run a low-wage economy. We can run a much sharper economy than we have with much more competition, but for a country in our position a low-wage economy can only mean a low-efficiency economy. It is not high wages but lack of efficiency and productivity which have dogged the British through crisis after crisis ever since the war.

5.34 p.m.

Mr. Frank Allaun: The Leader of the Opposition and his party would have spent more on arms, not less. This would have increased still further the deficit in the balance of payments which is at the root of our troubles. Therefore, any attack from that side of the House is worthless and invalidated.
My criticism of the Government is from exactly the opposite angle. Because the Government are failing to make drastic cuts in arms expenditure, they are making drastic cuts in employment and living standards instead. They are refusing to squeeze the profligate arms spending abroad, which accounts almost entirely for our international deficit. Hence the unemployment, wage freezing and belt-tightening which are to come. In saying that, I am expressing the views of the 47 Labour M.P.s who last night signed a statement on this matter, and I can assure the House that double that number would have signed if there had been time to secure their signatures.
One does not need to be a professor of economics to understand the troubles facing the country. They are staring us in the face—the run on the £ is due to our balance of payments and that, in turn, is almost exactly equal to our overseas military expenditure. Paul Bareau, the distinguished financial commentator who is certainly not a tremendous Left-wing supporter, wrote from Washington on 18th July:
Our commercial transactions,"—

and he underlined "commercial"—
visible and invisible, with the rest of the world show a large surplus and it is Government overseas expenditure (nearly £500 million a year) which puts us in the red.
The simple truth is we just cannot afford to spend precious foreign exchange on bases and troops abroad. The Government are acting as crazily as a man living on a pension of £4 a week and spending one quarter of it on revolvers, rifles and ammunition. Moreover, when told to be sensible, he cuts down on food. That is precisely what the Government are doing.
I do not often agree with the hon. Member for Bosworth (Mr. Wyatt), but he puts his finger right on the trouble spot when he points out that in 1938 Britain was spending £16 million a year on overseas military bases and forces, that in 1954 that figure had soared to £250 million, and today has reached the lunatic total of £560 million a year, I warn the House that if this continues, there will be further runs on the £, even if we overcome the immediate difficulty.
Exactly a year ago, the Parliamentary Labour Party carried a resolution asking the Government to carry out drastic arms reductions "much earlier than at present intended". That resolution was carried after the announcement by the Government of a targetted ceiling of £2,000 million a year—at 1964 prices—by 1970. The prices of things are going up and the prices of armaments are going up much more sharply. That means probably £2,500 million a year, in other words, an increase rather than a reduction in military expenditure.
I regret to say that even now the Government are not lowering that ceiling. Indeed, I reveal no secret—because it was in all the newspapers this morning—when I say that last night the Prime Minister said that the £2,000 million a year programme still stood. Hence the other, domestic cuts. It is to that that I object and I am sure that there are millions of people throughout the country who share my sense of ridicule about this folly.
Unemployment, according to the Chancellor, is going up to 470,000. Mr. William Davis, the shrewd financial editor of The Guardian, estimates the figure of 750,000. Mr. Richard Pryke, who resigned from the Civil Service, put the figure at 1 million. No one really


knows. In addition, wages are frozen for six months, whereas dividends will merely be stored up for future release. Purchase tax increases will affect working people much more than rich people, as will the hire-purchase deposit measures. In most working class families there is a dependence upon hire-purchase for furnishing their homes.
In contrast, the arms reductions announced are trifling or even non-existent. We are told that there is to be a saving of £100 million in Government overseas expenditure. Of this, £20 million will be in cuts in aid to Commonwealth countries. There is reason to believe that even the £80 million reduction is covered by changes envisaged in last February's Defence Review.
This figure also includes hypothetical savings on B.A.O.R. if we take those away there are virtually no military economies at all. This is despite the ending of the fighting between Malaysia and Indonesia. Even worse—it is officially stated that there will be no reduction in our expenditure over the next 10 years of £1,080 million in dollars on American planes. That is economic nonsense, as was said by the 47 Labour M.P.s in last night's statement.
It all adds up to this—even now the Government will not accept that Britain cannot attempt to retain its role as a great world military power. Even if we quadrupled our expenditure on arms and made the country completely bankrupt, we still could not compete as a first-class military power with either America or Russia and I weep no tears for that.

Sir Arthur Vere Harvey: I follow the hon. Gentleman's point about the large expenditure of British funds in the United States of America, which will have to be paid for some six or seven years hence. Would he agree that if we had the labour at home at least some of this equipment should be ordered through British factories?

Mr. Allaun: I objected very strongly to the TSR2, unlike hon. Gentlemen opposite. I was glad that that was abandoned, but it is double folly to buy American planes instead
Opposite me there are serried ranks of retired admirals, generals, colonels,—the lot! They are not all here at the moment.

I must say that they are sincere and upright men, but when they talk of "making Britain great again" they mean making Britain militarily great again, and they cannot do it.
They are dreaming of the days of the last century when it was possible to send a gun-boat to subdue a small country. This is no longer possible, because there are much larger sharks swimming around. Their criticism today is quite worthless, because they still support that point of view. What worries me is how the Labour Government succumbed to the Conservative's grandiose military dreams. Ordinary working people will be asked to pay the bill every time that they pay extra on their Purchase Tax, every time that the middle income man pays 4d. a gallon extra on his petrol.
Some people may think that this is due to Kiplingesque delusions of grandeur on the part of the Prime Minister, and this may be partially so. An even more serious factor is the insistence of our American masters. On 22nd July, Mr. McNamara, the United States Defence Secretary, was interviewed in Washington by Renee MacColl of the Daily Express. This is what he wrote:
Mr. McNamara was very emphatic when raised the question of a continued British presence east of Suez. He stressed, ' That presence remains absolutely essential. You British have been doing an extremely important job there—and it is necessary that you should go right on doing it.'
Now we know. If the British Government say that they cannot bring the lads in uniform home because of our foreign commitments, may I remind them of their commitments at home, to our own people, which I would put first?
Recently, I went on a visit to West Germany and before I went, thinking of a present for my wife, I asked her what I should bring home from Germany. She told me, "The British Army of the Rhine." [An HON. MEMBER:" All of them?"] I must admit that it would be rather inconvenient to have 60,000 men in uniform tramping up our garden path. It would certainly be a great advantage to the country, however, to have them over here.
When I was pleading with the Prime Minister recently to bring our troops home from the Far East and Germany he replied that it was true that it would


save expenditure in foreign exchange, but it would mean that the Government would still have to build expensive barracks in Britain. This is not so. Every town and factory in the country is crying out for labour. Why not bring home the 220,000 men overseas, release them from the Army and enable them to go into productive industry? This would kill two birds with one stone. It would save our expenditure and increase our production.

Captain Walter Elliot: The hon. Gentleman says that he would bring the Rhine Army home. This would mean that Germany would be the dominant political partner in Europe with the United States. Is the hon. Gentleman prepared to accept that?

Mr. Allaun: With great reluctance I have to accept that this is already the position. We have German commanders in charge of most British troops at the moment. Therefore, I do not think that that argument holds water.
If we put half of our 440,000 Service men into industry we would save costs and increase production. Drastic situations demand drastic remedies.

Mr. Patrick Wolrige-Gordon: If the hon. Gentleman's philosophy succeeds, after the men have come home and their bases been demolished, can he say that we will never again have a balance of payments crisis?

Mr. Allaun: This would cut our present deficit on the balance of payments. Most people in the country would heave a sigh of relief at this.
The new situation adds tremendous force to the resolution tabled by the Transport and General Workers' Union for the annual Labour Party conference in the autumn, which, along with many of the other affiliated organisations, is urging substantial cuts in arms expenditure. How drastic is drastic? It is a great deal more so than was believed to be necessary even a few weeks ago. A cut of £700 million a year, or one-third of our total arms programme, is required to put our country into a solvent position.

5.50 p.m.

Mr. Gwynfor Evans: It adds lustre to the honour which I have

of representing Carmarthen in the House that I follow so very distinguished, respected and loved a person as the late Lady Megan Lloyd George. [HON. MEMBERS: "Hear, hear."] It is still very difficult to think of one who abounded with such vitality and gaiety as the "late" Lady Megan. Her passing was a very heavy loss to this House, as it was to Wales, the country which she loved so well. I enjoyed her friendship for 20 years, and, although I twice had the temerity to contest Carmarthen against her, it did not affect the warmth of our friendship, such was the generosity of her spirit. I rather think that she might be happy to see me here today in her place, speaking not only for Carmarthen but, if hon. Members will pardon the conceit, for Wales.
I want to speak for Wales on this Motion, although the Welsh nation does not seem to be included in its wording. The Motion refers to one nation. But there are four nations in these islands. Perhaps the framers of the Motion had in mind the English nation, which, for this House, is the nation. It is often called the British nation, and indeed in England and overseas "British" and "English "are very often used synonymously. I think that this stems from the fact that there is a British State, and "nation" and "State" are often confused.
However, because there is a British State, it does not follow at all that there is a British nation. The British State is multi-national. It serves four nations, although one would not gather that from the policies of Governments. This is not being pedantic. It is because the Governments at Westminster equate Britain with England that the impact of their policies on Wales is not considered. What is good for the English goose is assumed to be good for the Welsh swan. Wales is ignored when policies are decided.
The power of the State has grown so greatly, particularly in this century, that it is only necessary for a multi-national State to ignore the existence of a small nation like Wales for that nation to be destroyed. We had evidence in this Chamber on Thursday that the English order has no place in it for a living Welsh nation. The rules of this English Parliament prevent even the taking of the oath in the Welsh language.
Since Wales was incorporated in England, in 1536, it has been the policy of successive Governments, pursued fitfully, it is true, to assimilate the Welsh people and so destroy the Welsh nation. The attitude to language is an example of this. In the middle of the last century virtually the whole of Wales was Welsh speaking. John Frost, the Chartist leader, would have to address his people in Newport and the Monmouthshire valleys in the Welsh language. Men who rode with Rebecca in the West were Welsh speaking to a man. The great insurrection at Merthyr Tydfil where between 30 and 40 were killed by the military happened in a town of almost entirely monoglot Welsh-speaking people.
In this situation it was decided in this Chamber, on the proposal of one who was a Member of this House, to, as he said,
send the English schoolmaster among them".
He said that this would be cheaper than sending the military to civilise them—that is, to make them English-speaking monoglots. Therefore, we had an entirely English education system imposed on the Welsh people, and the children in the schools of Wales were punished if they spoke a word of Welsh during their school hours.
The Welsh language still has no official status in its own territory, and there is no intention on the part of the Government to give it anything like equality of status with the English language. English institutions and techniques have been imposed on us and the Welsh people have no self-defence. There is still no Welsh cinema or independent broadcasting corporation. There is still no Welsh national theatre or opera house. There is no Welsh national orchestra, despite the unusual talents of the Welsh people. The language which was the language of law and government in Wales, of kings and princes, scholars and artists has been made a pariah language in this country.
The result is that the Welsh nation which should today be living with the dignity and fullness which the Scandinavian nations enjoy, and which would be living in that way if it had its own Government, is being reduced to ruin. Many members of your Press and politicians gibe at us because three-quarters of our people have been deprived of their

national language. It is the English order which has robbed them of their heritage. Now, through its spokesmen, it tells them that they are not true Welshmen. In doing this it has gravely impoverished and diminished their lives. I do not think that "barbarism" would be too strong a word to use for this.
This is usually justified on economic grounds. It is usually said that under the English order the Welsh people, whatever else they may not enjoy, do enjoy economic prosperity. For many, the death of a nation and the awful waste of great moral and spiritual resources matters nothing as long as the people are well fed, well-dressed and well housed. We are told that they are treated quite as fell as any slaves in history.
The Leader of the Opposition celebrated St. David's Day with the affluent London Welsh—and there are more Welsh born people in London today than there are in all the five counties of Mid-Wales. He said that Wales was the success story of the Tory Government. Now we have seen spokesmen for the Government soaring to even greater heights. During the recent by-election the Prime Minister told the people of Carmarthenshire, in a letter which expressed very great concern for Wales—after reading it the people of Wales felt that they should excuse his mistakes in Vietnam and Rhodesia; they were due, they thought, to his preoccupation with Wales —" The Welsh nation is prosperous". He gave us the reason for this prosperity in Wales. He said that it was due to the Labour Government's emphasis on regional development. The people of Carmarthen, praise be, did not believe him.
This is the sort of patronising rubbish which we have had throughout the years, and you will not be able to get away with it much longer because the Welsh are beginning to take their country as seriously as the English take their country and as seriously as the Danes and Swedes take their countries. They know the position. They see no evidence of this prosperity. What they see is mines closing, railways closing, steel workers being made redundant and a decline in agriculture.
In my County of Carmarthen, which is better placed than many in Wales, the economic situation gives the lie to the


glib talk of prosperity. It is a county of very treat natural wealth. There is in Carmarthenshire the only anthracite coalfield in Britain. There are steel and tinplate works, ports, and great agricultural potential: it has produced more milk than any country in Britain. We have there great scenic beauty and a talented people. There is everything there, but the population of Carmarthenshire is falling year by year. It is the biggest county in Wales, yet its total population is today smaller than that of a medium-sized town like Swansea.
What do the Government do about it? They introduce an employment tax to drive men from the service industries. In Carmarthenshire, where will they go? What other work is there for them? The Government introduce centralised bureaucratic control of the steel industry. The aridity of a socialism which is little but bureaucratic centralism makes one despair.
At a time when Wales desperately needs expansion, which it has not had in the past, it is having to face further contraction and deflation. Although there is no pressure whatever on Welsh manpower, unemployment in Wales is between three and four times as high as it is in these prosperous regions of England. [HON. MEMBERS: "Oh, no."] It is between three and four times as high as in the south-eastern region, and that is despite the heavy migration that we have had to face in Wales. Despite that, the Government intend to have still heavier unemployment, and that in a country which in the inter-war years saw nearly half a million people having to leave it because there was no work for them in their own land.
The Government do this because of English economic difficulties. They call it a crisis—that is a big word—but what do they know of crisis? In Wales, we are faced with a crisis far graver than that for which you mobilised all your resources in 1914 and 1939. There has never been a threat to the existence of the English nation, only to the existence of the English State. But what we are fighting for in Wales is the life of a nation, a nation which is threatened with extinction.
Your economic difficulty seems to us to be self-inflicted, as I have heard other

hon. Members say this afternoon. It seems to us to arise because you place England's prestige above all else. Sterling, the pound, the hydrogen bomb, Aden and Singapore—your costly efforts to keep these relics of an imperial past place a devastating burden upon the Welsh economy. The proportion of the gross national product, said the Chancellor of the Exchequer this afternoon, which is spent on overseas military expenditure is higher in this country than in any other country. That is an utterly shameful situation.
If you were prepared humbly to accept the reality of your present position in the world, there would be no talk of financial or economic crisis today and no panic Tory measures. This is an English crisis, but, as usual, the Welsh people have to pay more than their share of the price.
I would not have a single Welshman unemployed to save England's prestige. Even before we had this dose of inflation—and we in Wales cannot escape its effects; that is quite impossible—the economic situation in Wales was critical. The Government told us six weeks ago that before 1970 we would have to find about 30,000 new jobs in Wales. That was an unrealistically conservative estimate.
We expect the deplacement of 40,000 Welsh miners and the redundancy of 10,000 Welsh steel workers, and your agricultural policy, which will make agriculture an occupation which only the wealthy can enter, will drive thousands more from the land. The fact is that we would not be far out in saying that by 1970 we need in Wales, not 30,000, but more like 100,000 new jobs if we are to avoid the kind of migration and mass unemployment that we had in the 1920s and 1930s.
A problem of this magnitude cannot be tackled effectively unless you declare something like a state of emergency in Wales, but the massive complacency of the Government and their preoccupation with other matters lead us to be treated as a slight local difficulty undeserving of any special effort. The Welsh nation is prosperous, says the Prime Minister; and, therefore, if we are prosperous, why do anything about it? The Government say that they will give us advance factories—yes, sufficient to employ about one-tenth of the number necessary, even if they are


filled, and who will fill them in present conditions when they are built?
What you are doing in Wales is making a desert and calling it prosperity. I can think of only one European nation which is governed as badly as Wales is governed, and that is the people of Brittany, where the French Government is deliberately trying to destroy the nation.
If you thought seriously about Wales, you would have had ready two years ago a plan for Welsh development, something like the late President Roosevelt's Tennessee Valley Authority. We have among us many admirers of that example of planning. But no plan was ready, and still no plan is ready for Wales. The Government's regional set-up is an ineffectual irrelevance. They could have created balanced development and stemmed depopulation—and in Wales we have depopulation not in just a few areas, but in nine of our 13 counties. In other words, nine of our 13 counties are seeing falling population, as against only two out of the 39 in England. Not one of Norway's 18 counties is seeing depopulation, not one in a country which is far more difficult to govern than Wales. We are told that this kind of process is inevitable and is the price of living in the modern world. Nothing in this life is inevitable, not even a Labour win in Carmarthen.
If we are men, we have a will of our own, and we have a spirit and we can decide what our economy is to be. We could shape our economy if we had the freedom to do so. We are Welshmen in Wales, but we do not have the freedom to shape our economy. If we had that freedom we could subordinate the economy to social ends and, in particular, to create the conditions of full nationhood in our country.
A Government who were serious about Wales would first have created an efficient transport system. That is the key to all development. One cannot hope to have any industrial development without an efficient transport system. A Government serious about Wales would never have permitted the closure of Welsh railways. They would have modernised them instead. We have no evidence that Welsh railways in Wales as a

whole are losing money. All the evidence is to the contrary and that they are making a profit year by year in Wales as a whole. There was no need of Beeching in Wales. It was in England that you had to have him, and even after having Beeching you lost last year £132 million on your railways, half the total Irish Budget. Will you close all the English railways? Not on your life. They are necessary to the English society and to the economy of England. Have we no economy and no society in Wales that our amenities are dealt with in this way?
A Government serious about Wales would have built major roads in our country, but apart from a derisory few miles in Glamorganshire and Monmouthshire we have no motorways in Wales and very few duel carriageways. We are told that there is no industry in Wales to justify building them. Have you ever heard of the Autostrada del Soli, built right along the backbone of Italy as an axle for that country? Have you heard of the 3,000 miles of motorways which Italy will have by 1970? We are told that we cannot afford these things. How can others afford them?
How can the Six Counties of Northern Ireland afford them, for instance? By 1970, they will have 100 miles of motorways. The equivalent in Wales would be 200 miles in our 13 counties. The Six Counties of Northern Ireland are planning to build 200 miles of motorway. The equivalent in Wales would he 400 miles. Between 1965 and 1970, those Six Counties will spend no less than £87 million on roads alone. The equivalent in Wales would be £150 million spent on roads alone during that period. To make up the leeway in our country, we need an expenditure of £200 million. Actually, less than one quarter of that sum is to be spent. They are even cutting down on expenditure on roads in our country.
Our feeling is that the Government never will invest in our country on this scale. They prefer to spend their money on bombs and bases. They never will take the necessary steps to build up a healthy balanced economy in Wales. What, therefore, should they do? They should get out of Wales, and leave the government of that country to the Welsh people themselves. It would be good for England, and it would be good for the people of Wales. It would be good for England to have a prosperous nation


alongside her, instead of the ruin that the Government are now creating. It would be the right and magnanimous thing to do; and the English can be magnanimous, as many small young countries know from experience and as I know from my short experience in this House. I know that there is no shortage of magnanimity here. Why not apply some of it to the people of Wales in our present situation?
The Government recognise the existence of the Welsh nation. They have given us a series of concessions. It may be said that things are different in Wales as a result. We have a Secretary of State and a Minister of State, and, fortunately, we have had very fine Welshmen to fill those offices. It is no disrespect to or reflection upon them to say, however, that these offices make virtually no difference to our situation. After all, Scotland has had a Secretary of State for 80 years, and look at the awful situation in that poor country now.
Let Wales have the institutions of nationhood. Let Wales live like a nation and act like a nation. Today, she can do nothing for herself. She cannot even build a road for herself. She has no power of action, no power of decision or choice, and no freedom. Let the people of Wales be free to act for themselves and live their own lives rooted in the traditions of millennia, and rooted in their Christian values.
I do not think that anyone would be disappointed in the fruits of Welsh national freedom. The most exciting thing about Wales is her possibilities. They are limitless. If the Welsh people only had freedom, they would be found to do more than justify their existence. After all, we have been there a long time, and there is a growing movement throughout the country now, mainly among the younger generation, which is determined that this "ancient nation proud in arms", as Milton called her, will be there for a long time to come and that the language, so greatly enriched by the Romans when they lived among us—there are over 1,000 Latin words in the Welsh language from those distant days—will again be spoken through the length and breadth of our land.
Many people thought that the sun of Wales had set for ever, but I do not think so now. Looking round the country in which I live, I can see something different from the light of the setting sun. It looks more like the rising of a new dawn. "Westward look, the land is bright". I appeal for help at the seat of the only Government which we have to create quickly the conditions which will ensure for the people of Wales a fine national future.

6.13 p.m.

Mr. Jack Ashley: As one who has been appalled at the length of some of the speeches in this Chamber, I propose to make my contribution very brief. Some of the things which I intend to say will not be popular on either side of the House, but I feel that it is time that they were said.
One comment which will be popular is that the speech which we have just heard from the hon. Member for Carmarthen (Mr. Gwynfor Evans) is one of the finest maiden speeches that we have heard in this Parliament. I can assure the hon. Gentleman that we offer him our warm congratulations not only on his eloquence, but on his persuasiveness. Those of us who stood outside the House a few days ago to watch his arrival and listen to the singing of the Welshmen —and the people with flags depicting dinosaurs and cabbages, or perhaps they were red dragons and leeks—expected an extraordinarily good speech from him, and I can assure the hon. Gentleman that we were not disappointed.
I never appreciated the dilemma of the Opposition until I listened to the opening of today's debate. Here we have a group of hon. Members lecturing the Government on how to implement a policy which they themselves failed disastrously to carry out when they were in office. It is one of the great political ironies of the day that the same people who led the nation practically to economic disaster should tell the Government this afternoon how to conduct their economic affairs. No matter how they wriggle and twist, they cannot evade the fact that the basic cause and root trouble of our economic ills is the result of their stewardship over a decade.
In all honesty, I am not at all worried by the remarks which we have heard


today, nor by the vituperation which we can expect later in the debate. I am more concerned with the criticism which has been expressed from this side of the House., It is my belief that the economic battle will be fought in the factories, in the mines and in the docks, and, as a former labourer and crane driver, I recognise that there are certain critics of the Government on this side who will be listened to with respect.
Those critics have no hesitation in condemning the Government. We have heard eloquent criticisms recently from right hon. and hon. Members willing and able to condemn the Government, and they must not be surprised if we do not turn the other cheek and if the case for the Government is presented against them.
The voices which may carry weight in the factories and the mines are those of men like my right hon. Friend the Member for Nuneaton (Mr. Cousins). There can be no doubt that, when he speaks on economic matters, his voice carries a great deal of weight on the shop floor. His advocacy of a wages scramble must be sweet music in the ears of many trade unionists. As a former shop steward, I recognise that when the Government, the official trade unions or anyone else with a responsible opinion are asking for restraint, the man who comes 'along and says "We should have a wages free-for-all", is bound to win support. In that way, my right hon. Friend is bound to win support.
But although my right hon. Friend is playing this music loud and clear, it must be said that his ideas are far from clear. I believe that they are among the most confused and muddled ideas of any critic of the Government. He confuses long-term solutions with short-term necessities. He appears to be unable or unwilling to see the relationship between wage inflation and the balance of payments. In addition to the wages scramble, part of the panacea offered by my right hon. Friend is productivity. No one in the House, even the destructive critics opposite, will deny that. Of course, we all agree with productivity.
My right hon. Friend has been the Minister of Technology and has been primarily responsible for giving a lead in productivity over the past 18 months.

He has had a powerful voice in the Cabinet on matters of productivity during that time. He has been the acting General Secretary of the Transport and General Workers' Union, affecting productivity over the last 18 months. My right hon. Friend—and I told him that I would be making this speech this afternoon—knows full well that increasing productivity is a long, slow, painful complicated business. It is a vital, but a long-term job. If it is not, he ought to tell us.
If my right hon. Friend has a magic wand to wave, let him prepare to wave it now, and let him also tell us why he has not waved it when he has had the opportunity to do so during the last 18 months. By all means let us have his ideas, his energy and his enthusiasm for increasing productivity, but let him recognise the basic fact that increased productivity is not a substitute for, but a complement to, a prices and incomes policy.
I have said that I was a shop steward. I realise as well as anyone who has worked in the trade union movement that the voice of my right hon. Friend carries great weight in his powerful claim that his members should seek the increased wages they desire. We all have a "little cousins" inside us, waiting to get out, but we do not allow it to get out because we have a responsibility to millions of men and women to avoid the sort of mass unemployment which we saw under the Administrations of the right hon. Gentlemen opposite.

Mr. John Biffen: The hon. Gentleman referred to the "mass unemployment under Administrations of right hon. Gentlemen opposite". Let us be quite clear what he means. Does he mean during the post-war administration of the Tory Government?

Mr. Ashley: The post-war record of Conservative Governments is not a proud one, and unemployment under their administration was far worse than it has been under this Government. What the hon. Gentleman hopes may well be the unemployment situation later on is a different matter.
I am talking essentially about the policy of the Conservative Administration while they have been in office for the


last 40 years or so, except when we have been there. If hon. Gentlemen opposite seriously deny that they are the party of unemployment, let those who follow me in this debate make out a case which will convince the nation.
To return to the policy of my right hon. Friend the Member for Nuneaton, I think that it has to be said that the policy he is pursuing is that of an industrial quack. He is peddling a cure for our economic ills, but the medicine that he is proposing is only one part medicine, and two parts hogwash. If the nation swallows his cure we shall all find ourselves confronted with devaluation. Instead of deflation, we shall have desperation.
My right hon. Friend has attacked the Government in an extravagant manner. He appears in this House as a trade union giant, as a man who represents the trade union movement. I suggest that this is not so, because we should not confuse volume with value, nor should we confuse stridency with sagacity. My right hon. Friend represents the T. & G. W. U. and a few small trade union supporters. Although he controls 1 million votes at the Trades Union Conference, I do not believe that more than 5 per cent. of his members support him when he denigrates the Labour Government while they are struggling to deal with the economic crisis.
I conclude by expressing the hope and belief that the vast majority of trade union members in this country will follow those trade union leaders who are supporting the Government in their efforts to create a fairer and better society than their predecessors were ever able to aspire to.

6.25 p.m.

Mr. Nigel Birch: Most of the speech of the hon. Member for Stoke-on-Trent, South (Mr. Ashley) was taken up with a duel between himself and the right hon. Member for Nuneaton (Mr. Cousins). I have no wish to act as a second to either of them but if the hon. Gentleman is the best orthodox Government supporter that they can find to speak, they are in a pretty bad way.
I should like to add my congratulations to the hon. Member for Carmarthen (Mr. Gwynfor Evans) on his maiden speech. We met some years ago, but he

may have forgotten. He showed a very fine turn of Parliamentary wit. One thing with which I agree is the total uselessness of the Secretary of State for Wales when it comes down to business.
I do not want to go into the origins of the crisis. Basically, the crisis came about, as all foreign exchange crises have come about, by overstraining the economy and as a result having more unfilled vacancies than unemployed people, and all the things that flow from that.
At the end of my speech I shall say a few words about what we ought to do. This is very popular with the party opposite. I start by saying a word or two about the Chancellor of the Exchequer, because he did not answer the gravamen of the charge, which is that sterling has been desperately weak ever since November 1964. It very nearly went through the floor last July. It turned bad again in February and has been weak the whole time. Everyone to whom I spoke knew that this crisis was coming.
The Chancellor of the Exchequer says that this is a bit of bad luck. He ought to remember the words of Gibbon:
The winds and waves are always on the side of the ablest navigators.
The Government cannot blame this crisis on the seamen's strike. The strike started months ago, and the terms of trade changed some months ago. Contingency plans should have been prepared, ready to be brought in, but we know that this plan was cooked up over the weekend before last.
I want to consider for a minute or two why there has been this delay. In my opinion hon. Gentlemen opposite have been prisoners of their own words, and of their own promises. They have denounced and abused so much Peter Thorneycroft and my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) that they have almost come to believe that some of the things they have been saying about them are true.
Hon. Gentlemen opposite made pretty lavish promises at both elections. At the last election they were buoyed up by the National Plan which they had in their pockets and which they read out.


The title deeds for the Labour Government were set out by the Prime Minister in his speech at Swansea on 25th January, 1964, when he gave his great vision of the new Britain—science harnessed to industry, steady and rapid expansion, no more "stop-go", and so on. He did not say very much about how it was to be done, but he did make one specific reference to how it would be done, and that was a wages policy. He said he had a right to get a wages policy because he could go to the two sides of industry with clean hands, but he was in no way responsible for the faith-breaking interference with collective bargaining shown by my right hon. and learned Friend the Member for Wirral—faith-breaking interference with collective bargaining. If the Prime Minister lives to be a hundred he will still have words enough to eat.
The second reason, apart from being inhibited by their own words and their own promises, was the extraordinarily long time it took the First Secretary to realise that his wages policy was not working; in fact, I do not know whether he realises it yet. The plain fact is that if the number of unemployed is far fewer than the number of unfilled vacancies the law of supply and demand takes over. It is worth having a wages policy, and at the margin it will work, but to think that it is possible to get away with it simply by saying that there is a wages policy when the over-demand for labour is so great is simply to say that the law of supply and demand must be suspended in your favour—and it will not be.
The extraordinary thing about the First Secretary is the way in which he goes on talking about Sweden—as if Sweden had been completely successful in these matters. He said, "I started twenty years later than Sweden, but I am catching up". He is too modest. He is doing much better than Sweden. Last year hourly wages there rose by 11·2 per cent. and the wages drift—and this is an interesting thing to note in respect of a country which has a supposedly sophisticated wages system—was 3·5 per cent. No wages policy ever works for any country —whether or not it claims to have such a policy—when there is an over-full demand for labour.
I want to return to the business of splitting the responsibility of the Treasury and dividing it between the Treasury and the Department of Economic Affairs. To his credit, before he took office the Chancellor said publicly that he thought that this was a mistake. That was the opinion of everybody who has ever studied the matter. In my first speech after the Labour Government took office I predicted that the Departments would quarrel. I said that I thought that the Treasury would win, but after a struggle which might be long, and I said that I thought the carnage resulting from that struggle might be terrible.
We have had the battle all right, but it is not over yet. By an act of supreme folly the Prime Minister did not accept the resignation of the First Secretary. It would have been far better for the country, for his own party, and for the future of the First Secretary had he done so. The battle continues. The right hon. Gentleman has not yet lost his Waterloo. As the great Duke said:
Waterloo was a devilish fine-run thing.
I would not say with absolute certainty that the Chancellor has won, but he looks to be winning at the moment. The carnage resulting from this delay, and also partly from the other delays and the splitting of the Treasury, has been terrible.
The National Plan has been vaporised. We shall now have to look forward to a long period of stop—the longest in our history. Above all, we must consider the position of our reserves. I wish that the Chancellor had said more about them. This is the weakness and the danger of our position. When the figures of our gold and convertible currency reserves were issued at the beginning of this month they showed reserves amounting to £1,170 million—but that was after bringing in our second line reserves; by that I mean the liquefied portion of Government holdings in dollar securities. We know that at the time £900 million of that was borrowed partly from the International Monetary Fund and partly from the Swiss, presumably on short-term. We also knew that further sums had been borrowed from the Federal Reserve Bank in New York and that the forward commitments of the Bank of England in buying sterling were very great. Since then there has been a very heavy drain


on sterling, and I do not doubt that the Bank of England has had to buy a great deal of spot sterling, and borrow money to do it, and has also had to enter into very heavy commitments in forward sterling. This could mean that the whole of our published reserves represent borrowed money.
The point to get over, especially to those who talk a great deal about devaluation, is that if we devalue we must pay all that money back in gold at the new rate—that is to say, our debt expressed in sterling will be increased in proportion to the amount that we devalue.
But it does not stop there. We shall also have to repay at the new rate the remaining portion of the American and Canadian loans negotiated by hon. Members opposite after the war. Those loans illustrate what I mean. When originally negotiated they amounted approximately to £1,400 million. For twenty years we have been trying to pay them back. We have been paying off interest and principle for the whole of that period. As a result of the devaluation in 1949, however, we now owe not £1,400 million or less but £1,630 million. In spite of our twenty years' effort the debt has increased, and this could easily happen again in respect of any short-term debts.
When Sir Stafford Cripps devalued he said that he had to do so because it was essential to keep the minimum operable balance. We have not got a minimum operable balance now. That is the real danger. That is why this balance of any contingency plan is so dangerous and why the Prime Minister's visit to Moscow was a desperate mistake. It should never have taken place. I advise anyone who did not foresee the result of the visit to consult a doctor at once. There he was, causing the maximum pain, wiring back here to say that any Minister who did not agree would be sacked. Hard luck on them, because he himself did not know what his proposals were. First, the aeroplane was ordered and then postponed. All the time money was pouring out. Was his journey really necessary? I would say "No". But whether or not it was, it must have been the most expensive journey ever taken. It must have cost the reserves £100 million.
That having happened, at long last something had to be done. Whether it

has been done at five minutes to twelve or five minutes past twelve, I do not know, but if we take all these measures together we see that they represent the greatest deflation that there has ever been in our history. Inevitably more measures had to be taken because they were dribbled out gradually. My right hon. Friend the Leader of the Opposition pointed out that on 23 different occasions the Government have issued new deflationary proposals. They have had 23 bites at the cherry, which is quite a lot.
It is worth comparing what the present Government have done with what Mr. Thorneycroft did in 1957. I was then at the Treasury. There was a run on the £, and my right hon. Friend put up Bank Rate to 7 per cent., made certain cuts in central and local government capital expenditure and put a ceiling on Bank advances—and that was all. There was no increase in taxation, no hire-purchase restrictions, no S.E.T., no increase in the tax on beer or tobacco, and the other awful horrors that we have had. It worked, because he had timed it right. He meant what he said, and everybody knew it—and he got away with it.
Instead of that, we have had to submit to all this business. Will it work? There will be a considerable internal deflation. It is difficult to predict whether it will work, simply because nobody knows what the buffoonery of the S.E.T. will bring about, but I expect that in time there will be a considerable deflation—quite possibly much too much. Will it save the £? I pray that it will. The danger which I see is that the wage freeze will break down before deflation starts to work. The only advice which one can give to the Government is that. when they involve themselves in wage claims, they should stand firm.
The second trouble is the freeze on prices. We have been given a great deal of information about how this curious package was arrived at. The Economist. in its leading article last week, said that the Government had been advised that they ought to freeze wages but not prices. The reason for that advice is the lesson which has been drawn from what has happened over the last 20 months, when wages have bounded ahead—that side of the policy has not worked—but prices have been restrained. The effect of this


of course, is to add to inflation and to suck in imports still more.
The last danger, which is both a short-and a long-term one, is that the National Plan assumed a growth rate of 3.8 per cent. On that growth rate it based future plans for expenditure at 4¼ per cent. a year, which was a dangerous thing to do anyway. But of course the assumption of a 3·8 per cent. growth rate was wholly and completely unrealistic. That has gone with the wind, but the expenditure has not. If we go on spending as we are doing now, the effect will be that expenditure as a percentage of national income will rise very sharply—that is inflationary in itself—and something will have to go. What will go, of course, is productive investment.
I now turn to what I think ought to be done. People very often ask what we think ought to be done and there is always the temptation to give much the same answer as the yokel gave when he was asked by a motorist the way to London. He said," If you want to get to London, you don't rightly want to start from here." We do not want to start from here, but we are here. I will try to say what has to be done.
First, on expenditure. It is absolutely essential to get expenditure under control. What sort of approach to getting expenditure under control is likely to be most profitable? I believe that it is the one put forward by my right hon. Friend the Leader of the Opposition at the last election. It is the idea that people should pay a little for what they get. In the social services, we should use our scarce resources where they are most needed. Let me give two examples.
One is the prescription charges. Probably the bill for prescriptions is £50 million a year higher than it would have been if the charges had not been taken off. Of course, pensioners, the chronic sick and those who cannot pay anyway must be helped and must get their prescriptions free. But does anyone seriously maintain that the average family in this country, with a car and a television set, cannot afford the occasional prescription charge? Of course they can. What could be madder than these priorities? The whole hospital service has been ground down. Hospitals desperately need new

operating theatres. They cannot get them, yet £50 million in medicine is being poured down people's throats.
The other example is that of school milk and meals, and the grant in aid of £85 million and a lot more expenditure by local authorities, which is planned, under the National Plan, to increase to £100 million at 1964 prices in 1970. Again, of course, people who cannot pay for their children's meals must be helped as they are now, but does it make sense to say that the vast majority of people cannot pay for their children's meals? Is it right to pay out all this money while cutting down on the building of technical schools? The priorities are mad.
Another illustration, not in the social services, of getting people to pay something for what they get, is that of motorways. We know that the road programme is to be cut down, but we desperately need more roads. Why can we not have tolls on motorways? There are tolls on the Forth Bridge and there will be tolls on the Severn Bridge, and if people do not want to pay the toll they can go along the old way. We will get money by this approach to the problem.
It is essential to get expenditure down in one way or another. I do not believe that anyone really thinks that we get the best out of the people of this country with direct taxation as high as it now is. It works through the whole level. While dealing with expenditure, we must have a shift away from taxes on earnings towards taxes on spendings. We have had S.E.T., and if it had not been quite so dottily arranged I should have approved it. I should have approved a straight payroll tax universally applied at a low rate. The present lax is absolutely absurd.
Does anyone believe that we shall get an efficient economy, without some competition? We do not get it in this overstrained economy. What is the Government's contribution? To end all competition in steel. This is the maddest possible business—[Interruption.] The right hon. Gentleman ought to read the speech which the right hon. Member for Vauxhall (Mr. Strauss) made last night, in which he pointed out exactly what had happened about competition in the steel industry. He ought to know something about the matter, but I hardly think that the Chief Secretary does.
There must be some competition. Does anyone believe that we shall get the economy right with the trade unions in their present hopeless state? We were delighted to hear from the Prime Minister that the T.U.C. has supplied its evidence to the Royal Commission after fifteen months. That shows great drive and urgency. However, a little more is needed in order to legislate on the general lines which we suggest.
What have the Government done about restrictive practices? Every time the Prime Minister goes to a trade union conference he says, with that vivid gift of phrase which we all so much admire, "Tear up your rulebooks!", and, of course, nobody bats an eyelid. There are two things which we can do about restrictive practices. They could be examined by industrial courts in the full light of publicity, but one never gets rid of restrictive practices when there is a wage freeze. No one will sell his rulebook for nothing. They never have. That is why I think that this wage freeze is ill-conceived.
I have given a few suggestions to the right hon. Gentleman about how he ought to behave. I doubt whether he will take them, however. We cannot simply pack up. Our difficulties are fundamentally marginal, but we have allowed ourselves to drift into a very dangerous situation. Can we not pull ourselves together and be more sensible in ways which make economic sense? The Government have thrown so many things overboard, that it is possible to entertain a faint hope that they may one day deviate into sense. Alas, it is only a faint hope.

6.49 p.m.

Mr. Stanley Orme: The House will not expect me to try to follow the arguments of the right hon. Member for Flint, West (Mr. Birch), particularly when some of his basic solutions are to put back prescription charges and to remove the cost of school meals from the Exchequer. If this is the type of solution which the Conservatives offer, it is not the solution which we on this side will propose. I listened with great interest to the Leader of the Opposition's analysis of the present crisis. When he came to his remedies—of which he had none—we saw that they were Tory packages rolled up again in "if's" and "but's". I am

convinced that the House was not very interested in them.
We must look at the present position and we must break the boundaries within which we are now looking at this crisis. Within these boundaries, we are limited to the measures and the remedies which we can take. My hon. Friend the Member for Salford, East (Mr. Frank Allaun) spoke about Britain's role in the world, particularly from the military point of view. This is certainly one sphere in which the present boundary must be broken, I hope by a Labour Government. The present position is absolutely ludicrous, for, on the one hand, we are not able to balance our payments, while on the other, we are trying to maintain a world role, with bases and forces east of Suez and in Western Germany. It is only a myth to suggest that Britain has such a world role to play or that, because of our present role, we are listened to in the councils of the world. While this is happening, the foreign bankers are dictating our domestic policy to us.
I say with sincerity to the Government that unless we are prepared to break these boundaries and initiate fresh thinking and policies, particularly in the military sphere, the present economic crisis will only lead to further crises. A change in our attitude is vital and our basic problem is, of course, the balance of payments. the gap between success and failure is very narrow.
However, anybody listening to some of the tales of woe, particularly those told by hon. Gentlemen opposite—about Britain not producing the necessary goods, not moving forward economically and not trying to meet its industrial problems—should recognise those statements for what they are. They are not true. Last year, we produced more in goods—I am not speaking about monetary totals—than we ever produced before. As my right hon. Friend the Chancellor pointed out, productivity has risen by 31 per cent. in recent months, although this increase has been hidden or absorbed by external costs; overseas expenditure and higher prices of imports.
Britain is not in the doldrums. The balance of payments has hardened at about £350 million to £400 million in recent times and it appears that the foreign bankers are not prepared to


underwrite that sum. It is about time that we in this country accepted the realities of the situation, got these people off our backs—particularly some hon. Gentlemen opposite, who speak in grandoise terms about Britain's world role—and stood on our own feet. We can do that only if we change our present policies.
I suggest to the Government that it is rather late to start blaming the seamen's strike for our present difficulties. Many of my hon. Friends and I counselled how the seamen's controversy could have been avoided at an early stage. We were told that, by some means, the strike would show the foreign bankers could have confidence in us and that we were standing up for the prices and incomes policy. It was inferred, when my right hon. Friend the Member for Nuneaton (Mr. Cousins) resigned, that that, too, would result in confidence being shown in the Government because they were being firm about the prices and incomes policy.
In fact, the reverse has been the result. Recent policies in this matter have had an absolutely catastrophic effect and we have paid a dear price for the weeks of the seamen's strike, a strike which legitimately and honestly could have been settled very early on, in the interests of the seamen, for we might easily have granted their just demands at the time when they were made.
I wish to speak, as a trade unionist, about the important issue of productivity. A lot of nonsense is talked about the subject and it is said that there is a feeling abroad that increased productivity can be obtained only by manufacturing industry. This is not so. Increased productivity can be obtained in many ways, and even this place could do with a bit of examination from the productivity point of view.

Mr. Frank Allaun: What about a time and motion study?

Mr. Orme: It might produce some illuminating results.
Whatever hon. Gentlemen opposite say about liner trains, they must bear in mind the recent London bus agreement and the increased productivity that has been obtained on the railways ; for example, the extension of electrification that is taking place. A smaller labour force is producing this increased produc-

tivity and these men are proud of the technological achievements which they are making.

Sir A. V. Harvey: Would the hon. Gentleman admit that the electrification of the railways that has taken place in the North of England was put in hand during the Conservative Government's period of office?

Mr. Orme: I know the facts, but I am endeavouring not to make this a political issue. I am dealing with the productivity aspect of the matter and the hon. Gentleman will, in any case, agree that this electrification was long overdue.
Increased productivity has also taken place in, for example, the hospital service. Maintenance workers in the service are attempting to negotiate a productivity agreement with the Ministry of Health. The mining industry has also shown what increased productivity means and the cooperation of the miners has led to the introduction of machinery and new technology which has resulted in great productivity increases being made, with half the industry's labour force. Credit is due to the miners for the co-operation they have given.
I have sought to show that productivity is something that goes right across the board and that it is not something that can be achieved merely by exhortation. It must be related to facts and wages. A high-wage economy, linked to high productivity, gives the economy the independence we need. How do the Government expect to obtain higher productivity with a wage freeze and a deflationary policy which will create unemployment and short time working? How do they expect workers to throw over what are sometimes called—by people who do not understand the facts—restrictive practices which have been built up over many years to protect workers who fear unemployment and short time working? If those very circumstances are created, how can the Government expect workers to give up processes which they have built up and supported for many years?
I fear that the present policy will hamper our aim to increase productivity. My right hon. Friend the Member for Nuneaton gave the best exposition that has so far been given in the House of this issue. He showed that he understands


what increased productivity means. He knows what makes workers tick and what motivates them. It is a pity that we have not been following some of the policies which he has been advocating. I would like to see the Government establish a "Ministry of Productivity", so that this issue was not dispersed among many Departments. Increased productivity will not be obtained merely by discussing the matter at trade union annual conferences. Only on the shop floor will this and similar issues be resolved.
I have been gathering some facts about previous wage freezes. I do not wish to make comparisons between the Thorneycroft freeze of 1957 and the Selwyn Lloyd freeze of 1961. Comparisons of this sort are usually made by hon. Gentlemen opposite when they cannot give a better answer. I am more interested in how the Government can tackle these problems—and to find a solution we must go back to the Cripps era of the late 'forties and early 'fifties. At that time I had not long been back from the Royal Air Force. I was back in industry again and working in engineering as a shop steward.
The bitterness created over that wage freeze permeated right through into the middle of the 1950s, because of its unfairness among working people that has not yet been eradicated. It is obvious that another wage freeze at the present time will not work fairly. It will work unevenly.
Let us look at the matter in some detail. The workers in the public sector will be the first affected, those workers whose purse strings are controlled by the Treasury. The railwaymen, the firemen, the policemen, and the National Health Service workers, all these workers who, at the moment, have wage claims in the pipeline, are now at the mercy of the wage freeze. They will either have it thrust upon them and have to accept it, or there will be exceptions which will create bitterness amongst other sections that are excluded—all this when we are trying to create an era of productivity and increased production.
What about the workers in the private sector? Because of the deflation and temporary and other unemployment and short-time working that will be created, some will not get any increases, but other

workers in the parts of industry which will still be working full time will be able at least to fight for increases or maintain the present position inside their industry.
What about the salaried workers in many of the large industries who have built-in escalation clauses for yearly increases? Will they be excluded? What about the self-employed and people in all types of professions? How can one legislate against all these sections? One cannot, and this is where the unfairness comes in. It falls on the unorganised workers, because they are the people who can be tackled in large groups and are in easily recognisable sectors. Millions of other workers can escape through a loophole in the policy. That is absolutely monstrous.

Mr. Eric Lubbock: Would not the hon. Gentleman agree that one loophole which no wages policy can stop up is the worker paid by results, the worker in engineering on piece work who can earn more by his own efforts?

Mr. Orme: This is, again, a question of productivity negotiated at the point of production. In the classic phrase, this is where the "wage drift" comes from. But it is not wage drift. Such earnings are negotiated with productivity in mind. I have negotiated thousands of such agreements as a shop steward, and one does not get productivity bonuses just for snapping one's fingers. It is necessary to get production to get productivity bonuses. In consequence, workers can still fight for this, although the squeeze goes on and they therefore find it harder than previously.
Alongside this question, there is the question of rents and mortgages. When I went home last weekend the first question that I was asked by a person who is just buying a house was, "Will our mortgages be frozen as well?". And what about council house rents? If the cost of these vital things continues to increase when a worker is on a frozen wage, perhaps with his overtime cut, he is put in an almost intolerable position. As a result, workers will have to take the only action open to them to try to improve their conditions. This will not help to achieve the production and productivity that is required.
Then there is the question of prices. I noticed on the very day after the Prime Minister's statement that the prices of important foodstuffs were increased by some of our very loyal firms. This is an example of what happens when there is appeal for restraint on prices, and similarly in relation to dividends.
This is the issue that broke the freeze of the Cripps period. We had a wage freeze which was imposed for certain sectors and an appeal for price and dividend restraint. Dividends were not paid out at the time, but were paid out at a later date. These things are not overlooked by people in industry. If a man does not get a wage increase, if it is put off for six or 12 months, he never gets it. It is an anachronism that the very opposite should happen in relation to capital.
This brings me to the Prices and Incomes Bill. It was not relevant before, and I fail to see its relevance now. When we were involved in negotiations on prices and incomes and I met my right hon. Friend to discuss the whole question who were told that the Bill would work voluntarily. Then it was found that it could not work voluntarily, the punitive provisions were put in, particularly those in relation to the trade union movement to which my hon. Friends and I objected, and we were told that that would he sufficient, and that it would need an Order, passed by both Houses of Parliament, to bring Part II into operation.
We were then told last week by the Prime Minister not only that the Bill will be rushed through, but that at the same time further Clauses will be put in, and the Bill will be made far stronger than we ever expected when it was first produced. This was done before the ink was hardly dry on our decision to give the Bill a Second Reading.
The issue of the Bill is of grave concern among industrial workers throughout the country. It affects every one of us. I am in favour of a prices and incomes policy, and I make no bones about it. But it must be a policy that is fair and works right across the board, and it should not have punitive provisions.
We shall not achieve it by coercion. We shall not get workers producing and working for the type of society we want

by coercion. Other ways must be found of doing it. The way of coercion will lead to real difficulty. The Prices and Incomes Bill is not relevant to our present situation, and should be withdrawn.
I come now to some alternative suggestions that my hon. Friends and I feel should be undertaken by the Government at the present time. I shall leave the Opposition behind me on these issues, because we feel we have some basic alternative proposals to solve the problems facing us. When all else has failed, the Government might try some Socialism. The people expect a Labour Government to practise Socialism, and if we do not introduce some Socialist measures but introduce the classic capitalist attempted solution they will feel that we have no real solutions of our own.
If the solution means that we cannot maintain full employment in a full employment economy, with a shortage of skilled labour, then the mixed economy upon which we are living and working cannot be made to work under those conditions. The Opposition admitted that they cannot make it work, because the Leader of the Opposition has said this afternoon that he welcomes the wage freeze and recognises that there must be unemployment. We do not accept either of those premises. We feel that there are other ways of tackling the problem, apart from productivity, which I have already dealt with.
When the Chancellor is stuck—this has happened to other Chancellors on the other side of the House—and he wants to take drastic measures to save the economy, where does he turn first? He turns to the public sector. To the credit of the Government, they have not cut expenditure on housing, schools and hospitals, and we are glad to accept that. It is the difference between what this Government are doing and the Selwyn Lloyd freeze. But massive reductions in public expenditure on electricity, on roads, on local government projects have been made.
If the Chancellor turns first to the public sector, which is only 20 per cent. of our economy now, how much better it would be if he could turn to that sector and it was 50 or 60 per cent. of the economy. [Interruption.] I know that


hon. Members opposite will not like this, but they will have to listen. If the Chancellor controlled that sector and could turn to it in such circumstances as these, with that much of the direction of the economy in his hands he would have the fiscal and physical means open to him to do a great deal.
It is for this reason that I consider that the time has come not only for the steel industry, on which we voted yesterday, but for others of our basic industries to be brought under public control. I add to that that banking and insurance, also, should be very carefully considered with the same end in view.

Mr. J. Bruce-Gardyne: Is the hon. Gentleman suggesting that the case for extending public ownership is based on enabling the Chancellor to wield his axe yet more extensively so that we have a still more extensive recession than we shall have now?

Mr. Orme: I was arguing that the Chancellor should have more control over the economy. It is the private sector which he cannot control and which gets up to its devious means of avoidance and every other device. It is that sector which gives the trouble, and it is that sector which must be faced. If the Chancellor were able to control it as I suggest, he would be able to plan ahead and avoid the pitfalls into which we have now fallen.
My hon. Friends and I who signed the statement issued last night, and many of those who signed the letter to The Times last Saturday, have set out a number of proposals which we feel the Government should take in trying to avoid or overcome the problems now facing us. I accept what the Chancellor said about unemployment, and I know that there is no one on this side of the House who would ever wish to see it or create it if he could possibly avoid it. This goes right through the Labour movement. It is a very emotive subject for us and one on which we feel exceedingly deeply. Therefore, to my way of thinking, it is not enough to talk of spreading unemployment about. We must think of preventing it altogether.
One family with an unemployed father, one unemployed mother, a widow who is finding it exceedingly difficult to

get other employment in present circumstances, one elderly worker unemployed at 50 or 55—these are the people we should be thinking about. It is not easy to retrain them, with the best will in the world. There may not be the type of jobs available for which they can be retrained. Unemployment destroys human dignity, and the destruction of the dignity of one individual is enough for me. I was brought up and suffered in the late 1920s and the 1930s, and I do not want those times to come back. This is why the people look to a Labour Government to maintain full employment, and this is why we are pressing the Government so hard to take alternative measures.
In my view, the Chancellor of the Exchequer did not give a satisfactory answer on the question of selective import controls. He spoke of our E.F.T.A. agreements, but it is well known that if Britain commits any error under the E.F.T.A. agreements all the E.F.T.A. countries fall on us, but the E.F.T.A. countries take liberties weekly and monthly in relation to our position.

The Minister of State for Economic Affairs (Mr. Austen Albu): The Minister of State for Economic Affairs (Mr. Austen Albu) indicated dissent.

Mr. Orme: My hon. Friend shakes his head, but that is true.
We must take selective import controls and use them as a basic measure. It seems ludicrous to people outside the House that "one-armed bandits" and all manner of such things associated with what my right hon. Friend the Prime Minister once called the candyfloss society should come flowing in. There is no reason for it. There are many necessary commodities, wood frames and the like, which we could make in this country which are coming in from abroad, from Sweden and elsewhere, the import of which should at least temporarily be stopped.
Next, the question of the export of capital, particularly in investment in highly developed areas. The Chancellor dealt with this as one of the themes of the measures he is taking. The flow of capital in recent months and years into, for example, Australia and New Zealand is something of an eye-opener to us. This avenue, particularly in the


sterling area, should be most closely examined. Indeed, my hon. Friends and I feel that the whole idea of Britain being a sterling banker should be closely re-examined. The concept of the £ looking the dollar in the face is a bit jingoistic, like the east of Suez policy.
In my opinion, we are trying to maintain for Britain a world role which no longer exists. We have a very important part to play in the world. We are a nation of highly skilled and highly developed people who can produce the goods and commodities which the world wants. We can virtually be a power house and a tool room, but we must get our priorities right, and one of them is not to masquerade about the world in the uniform of the 19th century.
We are now in the latter half of the 20th century, and we are running about, trying to keep up with ourselves, to impress people who are no longer inclined to be impressed. To be a world Power we must be a world economic Power, playing our part in the United Nations and elsewhere. I believe that we shall be listened to in the councils of the world because Britain has much to contribute. But the days of flag waving and jingoistic attitudes are over.
My Hon. Friends and I are putting forward these alternatives, and others, to the Government because we want the Labour Government to succeed, because for most of our lives we have worked and fought for a Labour Government, and we do not want to see them go down tied to the Conservative policies of the past. We believe that there are alternatives—I have tried to outline some—and we believe that, if the Government will listen to what we say and implement some of our proposals, changing the way in which the economic and political director is pointing at present, Britain will still have a part to play.
We can still maintain full employment at home. We can have an expanding economy and we can have our social services. But we shall not do it by regressive deflation, wage freeze and unemployment.

7.19 p.m.

Mr. Hugh Fraser: The hon. Member for Salford, West (Mr. Orme) has made a powerful contribution and shown the House some of the

problems which exist within the Government and the Labour Party. I shall discuss some of the possibilities which are open to us today, but, before doing that, I wish to emphasise how serious our present situation is.
It is now 21 years since the end of the last war, and since then we have had no fewer than 11 sterling crises. What is alarming, and becoming more alarming, is the increase in the rate of spasm of these sterling contortions. Over the past 11 years they have been falling at an average rate of about one every three years, and they are now falling at the rate of one every seven months.
The other alarming thing is the amount of support that sterling has had to attract to keep it in position during the last 21 months or so, and the cost of that operation, which is rising. That must fill us all with some alarm as we are about to embark on the Summer Recess. I have considerable alarm when I look to the autumn, when we have the normal strains coming on sterling, when, in November, the surcharge goes and, further, when in the fairly near future the strains on the gold exchange standard to which the Prime Minister referred yesterday will clearly increase.
When we have Mr. Rueff, of France, and Mr. Triffin, who stands such extreme trials in the liquidity argument, agreeing on the dangers of the stresses on the gold exchange standard, it is time that those sitting on the Treasury Bench fastened their safety belts, or, at least, started something effective.
The problem here at home can be expressed in comparatively simple phrases. Ever since I can remember, and certainly ever since the party opposite has been in office, nearly every person in the country has, in spite of a mounting sterling crisis, improved his standard of living. That is an irrefutable fact. Another very simple fact is that, in spite of the export boost, exports have not risen to a point that meets our imports or our commitments overseas.
Those are the two basic problems of our economy, and I feel sure that throughout the House and the country there is a feeling that the lack of resolution of these problems has gone on for far too long under both our Government and the Government of the party opposite. Everyone now feels that, in this respect,


enough is more than enough, and that we must resolve the problem. This problem has to be resolved now by a Socialist Government which, for good or ill—my personal belief is that it is for ill—are in office, but it is a difficult problem to resolve, especially now.
There are three possibilities now open to a Socialist Government. First of all, there is what I am sure the hon. Member for Salford, West would agree with me should be called a Schachtian Socialist system, a dirigiste system of government. The second is the deflationary package which the official Government have put forward. Thirdly, there is the possibility that ought now to be discussed here—we have discussed massive unemployment and we must get rid of many secret and sacred cows—of devaluation of the £.
This latter possibility is discussed in every market place and in every newspaper. Right hon. and hon. Gentlemen on both Front Benches have their lips properly sealed on the issue, but it is a subject that this House of Commons must discuss, because this debate is not about an abstraction, but about sterling, and the part it has to play in the world. It behaves us to speak on this subject, not representing our party, or our connections in the City, or anything else, but speaking as Members of Parliament, believing that what we say is in the country's best interests.
There is always another alternative open to hon and right hon. Members opposite, and that is that "Chairman Shinwell" should take them all and jump in the river, which seems to be the fashionable thing to do. However, perhaps we can leave that.
Let us now look at the three possibilities open to the Government today. First there is the Schachtian plan. The trouble with Schacht now is that he is not in the group of 20, 30 or 40 hon. Members opposite. I cannot see him present there, nor can I see Hitler, who was necessary to make Schacht effective. I think that the danger of those proposals, apart from the fact that they are personally repugnant to me, is that they are unworkable and reduce the standard of living.
Much has already been said about the Prime Minister's plan, on which I have only few comments to make. According to the Prime Minister, one of the real causes of spasm in the exchanges was the seamen's strike. If that statement be true, the power that the Prime Minister and the Government can exercise over further strikes is negligible. That was one of the most foolish remarks that could be made by a Prime Minister at the very moment when he was saying, "I will put teeth into the Prices and Incomes Bill." One strike, and sterling is off course. It is a most extraordinary statement.
I agree with the hon. Member for Salford, West that this wage freeze is unworkable. The reasons he adduced could scarcely be improved on. It will not work, it will be unpopular, and it will lead to grievances. More fundamentally, I believe that a purely deflationary solution is not the solution we should seek at the moment. Of course, there should be an element of deflation. Of course, it is absurd that the number of vacancies should be greater than the number of people available to fill them. Of course there have been errors in industrial relations, but I do not believe that this type of deflation proposed will be effective.
My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), when Chancellor of the Exchequer, imposed a deflation totalling about £250 million. The package now put forward by the Government totals rather more than three times that amount. Our two main tasks are to reduce internal spending and improve exports but the type of deflation now proposed tends to put up export unit costs. That has always been the case in the past—the unit cost of exports has gone up. Far worse than this, the effect of a deflation of this character and size is on public and private investment, which will be put back for 24 months.
It will do no lasting good, because the moment will come when the brakes are released and we are faced with precisely the same problem as before with more antiquated equipment, equipment that has not been kept up. At that moment, we shall have the old stop-go cycle starting again. I do not believe that is any more good enough. Imports are


checked, but wage claims pile up whether under a freeze or deflation. If we look at the graph of wage claims during various periods of deflation, we see that they do not diminish but mount at almost precisely the same rate as previously. Then we get a release of the brake, people flood in with demands and we are again in a balance of payments problem. That is what we have seen.
Another thing which is frightening about this policy, and frightening for industrialists who hoped that things were now to go ahead, is that there is now no light at the end of the passage. The Prime Minister is buying time, as the Leader of the Liberal Party said. The public are "fed up" with politicians buying time and especially with people buying time to put that time to little good purpose. Deflation, like patriotism —they often seem mixed together—is not enough.
I want to say a few words about the issue of devaluation. I think it only proper that this should be discussed in this House. It is only proper that we should look at it for a few moments. Parity is what we are discussing. There is nothing to my mind particularly sacred about parity, that is to say, the level at which any currency is kept. The purpose of the parity of the £ is to serve the people of a country and to be worked in their interests. It is a line which is drawn and a line which in this country in my lifetime of nearly 50 years has changed no fewer than five times. There was a change in 1920, a change in 1925, a change in 1931, a change in 1940 and a change in 1949.
Those who think that it is almost sacrilegious to mention the actual value of the £ are in grave error. It has changed and undoubtedly it will have to change again. The question we have to decide —or rather to ask ourselves, not to decide, that is for the Government—is whether variation in the rate at this stage would be of advantage or disadvantage to our country. My right hon. Friend, in one of his more brilliant excellent speeches, pointed out one of the major disadvantages at: his stage which is having to pay back the money and increase prices, to go to those to whom we owe debts throughout the world. That is a very major factor.
On the two questions to which I referred at the beginning of my speech, which are root questions to our economy today—the questions of exports and of the standard of living we enjoy here—there must be considerable advantages in a devaluation of a controlled sort. It is no good hon. Members on either side of the House saying that the way to improve exports is to cut down home production to make more room for exports. I am in exports to a certain extent and I know that the way to increase them is profit and the margin of profit today is far too low. There is no money in it. The way to make exporting attractive is to make a slight variation in the rate of exchange.
In this country, when we talk about a wage freeze it applies to only 40 per cent. of the people. It is unfair that under 40 per cent. should be so struck. When we get a reduction in the purchasing power of money overseas we get a reduction instinctively and automatically in the level of the standard of living at home. I believe that this is needed today and it is done across the board. Of course, there are problems with other countries. Of course, the question of devaluation might set off a series of other devaluations throughout the world, but of one thing I am certain. We have to have a £ which is strong and a £ which is strong is not the sort of £ the Prime Minister seems to see, a £ which is upright, arid and virginal, a sort of moon goddess sometimes at 2·82 and sometimes a little slumped at 2·78. His relationship with the £ is rather like the relationship of a Prime Minister to Queen Victoria. She was rather ratty.
My idea of a £ is that of a handmaiden of the people, a bit of a slut, a girl I want everyone in the world to love. If they do not love her we have got to change her. The £ has nothing to do with the Union Jack; the £ is something which we exchange throughout the world. The only way to exchange it throughout the world is to make it attractive and rather slightly under-valued with a great strong economy behind it. For far too long hon. Members on both sides of the House of Commons have attacked, whether it be management or trade unions, generals or the Civil Service, and far too long this House itself has failed to take a lead.

7.38 p.m.

Mr. Robert Sheldon: The right hon. Member for Stafford and Stone (Mr. Fraser) always impresses us with his sincerity and his understanding of many of the problems facing us today, but when he talked about his desire to see the £ as a slut I think perhaps what he meant was his desire to see the £ as a whore loved and taken by everyone.
This may well be the situation that many hon. Members would like, but I would not go into it further at this stage. What I looked for in the economic measures announced by the Prime Minister on Wednesday last week was the long-term reassessment which I hoped might have been made by a Government coming into office with a long period ahead of it. I found great disappointment in that we did not have this kind of reassessment which the people of this country understood would be one of the consequences of a Government with a large majority, with a mandate to govern, with a mandate to take some necessary measures, many of which would be unpopular.
Because of this I regret, as many hon. Members will also regret, the expedients which were necessary to get us out of our immediate difficulties without at the same time touching upon some of the long term aims. If there is any time at which we can take the fundamental measures required to put the economy right it is now. There have been very few times in the last dozen years when these kind of measures could have been put. This year was one of those times. It is a pity that at the same time we still await the Third Reading of the Finance Bill, for so many of the measures in that Bill appear less relevant now than when it was introduced.
The causes of our economic difficulties go back a long way. One of the most important is the decline in exports to the Commonwealth. In the years 1950 to 1959, exports to the Commonwealth and the sterling area averaged 48 per cent. of the whole of our exports. Since 1960, they have never been over 40 per cent. and last year dropped to only 35 per cent. That drop represents about £600 million worth of exports to markets we had previously enjoyed.
This is one of the fundamental problems that we must overcome and it is

largely due to the fact that imports into Commonwealth countries were biased in favour of British manufacturers, mainly because we had considerable control over their tariffs. Frequently, too, we had some control of their economies so that we were able to arrange favourable trade agreements which helped our exports. Finally, many of those who made the purchasing decisions in these countries were filled by people favourably inclined to Britain, for many of them had come from here. All these factors are indefinable. Some of them exist no longer and in some places have been replaced by an anti-colonialist sentiment. Commonwealth trade as a whole is increasing but we are not getting the benefit of the increase. Although our exports to other countries have been increasing, this by no means counters the massive drop in Commonwealth trade, which was a traditional source of our prosperity. That is the first of the long-term causes of our economic difficulties.
The second cause, to which attention was drawn by my hon. Friend the Member for Salford, East (Mr. Frank Allaun) is the level of Government expenditure overseas. Last year, this was £454 million net and it must be remembered that this is paid for fundamentally by exports. The Government spends overseas about 9 per cent. of what we as a country earn in exports. Before the war the average was 1½ per cent. From 1932 to 1938 we spent £6 million in Government expenditure a year out of exports of £800 million. The peak year was 1938 when the figure rose to £13 million, which was 1½ per cent. The second cause then of our post-war economic difficulties is that, pre-war, we spent 1½ per cent. of our exports on Government expenditure overseas and this has risen to 9 per cent. in the post-war years.
The long-term solution lies, obviously, in more exports, but the immediate solutions must be considered. They are all unpalatable. The first is heavy and prolonged deflation. The second is devaluation with short sharp deflation. The third is import controls. The fourth is defence cuts, in particular east of Suez.
I also mention, for the record, the possibility of an incomes policy not because I place much credence in it but because, having failed with the other options, unfortunately there are many


people who feel that our economic salvation still lies there. For my part I would accept that an incomes policy, if it were to reduce inflation by a ½per cent. or 1 per cent., would be worth having. But we must not make the mistake of assuming that it can solve our economic difficulties. It can help on the margin and that is not to be scorned, but it is not by any means central to our economic difficulties. It does not provide the central solution.
The first of the real alternatives is heavy and prolonged deflation, which is before us now. First, we have unemployment, which may be even more massive than we have heard so far because, if deflation is to work properly, unemployment must be massive. If we do not get unemployment, it is a sign that the deflation is not working. But unemployment, as my hon. Friend the Member for Salford, East mentioned, would lead to an increase in restrictive practices and to a lack of co-operation in industry.
The advantage of this kind of deflation is that so much foreign exchange is not requires: to pay for the imports to be consumed by the unemployed. They produce nothing themselves but neither do they consume so many imports.
The third result of unemployment is that wage rises become less frequent, prices do not rise so fast and we become more competitive overseas. But coupled with this is the massive disadvantage of a down-turn in investment. Despite the investment grants, fundamentally investment only takes place when the manufacturer can see a chance of selling his product and unless he does see that he will not invest, certainly not at a time of prolonged and heavy deflation.
That investment is lost for all time We lose its production and the growth which comes from it—and thereby the only chance of a real solution to our economic difficulties. The other result of heavy and prolonged deflation is that exports are likely to increase as manufacturers find little other outlet for their pods at home, but that is a crude way to improve exports.
It is reckoned—although it is rough arithmetic—that £30,000 million of the gross domestic product is equivalent to £5,000 million gross imports, which gives a ratio of about 6 to 1 between produc-

tion and imports. So, for £1,000 million of deflation, there is a reduction of £200 million in imports. If one regards that figure as the goal, one deflates by £1,000 million.
If this deflation is not enough, foreign traders and bankers are not likely to be satisfied. If it is truly deflationary, we shall get all the evils I have mentioned, but probably exaggerated. My fear is that we may fall between the two—that we shall not be deflationary enough to satisfy the foreign bankers and traders while being too deflationary to allow growth, even a limited growth, to proceed.
The other course, also mentioned by the right hon. Member for Stafford and Stone, is devaluation, but I would couple with it short sharp deflation, which is a necessary accompaniment. We did not devalue in 1964 and I supported the Government in their refusal to do so because of the lack of capacity in the economy at the time. Had devaluation taken place then, we could not have been sure that we would have got the exports from those factories which had not capacity sufficient to increase their exports. If at the same time imports had remained high, we would have had no benefit from devaluation. But if one deflates at the same time, one hardens the home market, restricts it, and moves labour into factories where it is needed. As a consequence, capacity becomes available because of lack of home demand and one is able to make use of it and so export with the price advantage that devaluation brings in its train.

Mr. Gwilym Roberts: Would not my hon. Friend agree with me that both he and the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) tend to neglect the one great disadvantage which occurs with devaluation, which is the automatic rise in the cost of units of production in terms of the higher cost of imports and in terms of the pressures for high labour costs and so on which follow such a move automatically and which are far greater than any retaliatory effects?

Mr. Sheldon: Imports which come in also go out in the form of finished manufactures and of course devaluation plays no part in that, but the other consequence of devaluation must be a short sharp deflation to limit imports, which in any


case would be limited because of price rises consequent upon devaluation.
But these arguments about devaluation tend to be a little academic. As we now know, the arguments are not economic, but rest very largely on the political reputations of those people who have committed themselves to this solution, and that must always be allowed for.
The third of the alternatives is the introduction of import quotas. The advantage about import quotas is that for the first time a measure of certainty is introduced into the balance of payments equation. One acts directly upon the balance of payments and one can tell in advance exactly what the level of imports will be and can determine with some assurance the balance of trade in advance.
The difficulty of this alternative is in its working. I have sold to countries overseas when they have slapped on import quotas and the result to international trade has been confusion. But other countries have used them to great effect. We are denying them to ourselves when we have difficulties much greater than those of many other countries which have employed them in the past. They are difficult to work and I do not accept them easily. I suggest them as an alternative only because I am convinced that the other alternatives are even worse. As I said at the beginning, we must all look at these problems not to find ideal solutions but to find solutions which must be acceptable if we are to get our balance of payments right.
E.F.T.A. and G.A.T.T. allow import quotas, admittedly under duress. Manufactured goods imports amount to more than £1,000 million and we could obtain about £150 million from that and about £30 million from machinery and transport and probably £50 million from miscellaneous manufactured articles. The import savings would then give us roughly the figures required, which most hon. Members would accept as being about £200 million, or £250 million, or £300 million.
The fourth of the solutions for our economic difficulties lies in defence cuts and in particular those east of Suez. Total expenditure at the moment is about £293 million in foreign exchange and a total of about £605 million. What

concerns me most is that the icy blasts which are blowing throughout our economic structure do not seem to blow quite so closely or quite so icily on defence expenditure, to which we should turn for some savings.
The four alternatives which I have mentioned—heavy prolonged deflation, devaluation coupled with short sharp deflation, import quotas and defence cuts, in particular east of Suez—are all unpleasant, but we have to take our choice among these four. The trouble is that these options which should have been open to us have been closed because the reputations of so many rest on their remaining closed. In the months to come our task must be to start reopening some of these options which have been closed a little too early. It is time to get our priorities right and our priority is not to preserve the stands taken by individual Ministers.
It is not the maintaining of an overvalued currency and still less the supporting of military postures with money which we do not have. Our priority must be economic growth and must be industrial expansion and it is to those objectives we should now turn.

7.55 p.m.

Sir Arthur Vere Harvey: I am sure that the whole House will have listened with interest to the speech of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) who spoke with great sincerity. I was impressed with that part of his speech which referred to loss of exports to the Commonwealth. I have studied certain aspects of this matter. Some years ago I was in Australia, trying to sell British aircraft. Of course, I did not succeed—although I got very near it.
The fact is that, apart from a few small aircraft, not a British aircraft has been sold in Australia since the days of the Viscount, 12 years ago. Yet the Australians expect to sell us their goods, as do the New Zealanders. The Canadian market is dominated by the United States. It is said that we should reverse that trend, but the Australians are now trading with Japan and also with the United States, to a great extent.
The salvation of this country, of course, is Europe. I was against going into Europe a few years ago, but I have come


round completely and I now believe that Britain has to face up to going into Europe.

Mr. Lubbock: I am sure that the hon. Gentleman is right about the sale of airliners, but am I not equally right in saying that the Beagle 206 has been sold in Australia?

Sir A. V. Harvey: But not a major aircraft. The Beagle is a small, executive aircraft costing £15,000 or £20,000, and I was talking about fighters and bombers and large airline aircraft. I think that I am accurate in saying that none has been sold, which is deplorable.

The answer is to consider going into Europe, yet 80 hon. Members opposite have signed a Motion against our doing so. The Government and the Labour Party as a whole have to face up to this issue of what they are to do about Europe, because we are not doing: o make the best of friends in Europe. We shall soon not be wanted and as politicians we have a duty to consider such a move.
Do not let us "kid" ourselves as Members of Parliament that the public today has a great respect for politicians; it has not. By and large, the public is sick and tired of politicians and wants some action. It wants some straight talk and it wants something done. It does not want the flannelling, day in and day out, which it has had in recent years.
In his television broadcast last week, the Prime Minister said that all was going well until three weeks before, which takes us to about the fifth week of the seamen's strike. But all could not have been going well in the fifth week of the seamen's strike. The right hon. Gentleman is now blaming the seamen's strike, but he must have known when the strike had gone on for several weeks that its reprecussions on the country's economy would be very serious. I was not taken in by that speech. In denying my right hon. Friend the Leader of the Opposition the right to reply to that controversial speech, the Governors of the B.B.C. acted disgracefully and did not do their duty to the public.
There is not a great deal wrong with Britain at heart. We are a great nation and we probably have the best craftsmen in the world, covering all industries. We have good, hard-working, honest people

and there is nothing much wrong with them. What is lacking today is the lead. Why has the pound not strengthened in the last week? Why does it stand almost where it stood a week ago when the measures were introduced? I know that we must not talk about devaluation, and I do not intend to do so, but I would have liked to have seen the pound considerably stronger after the introduction of these immediate measures. I am not convinced by the Chancellor of the Exchequer waving a statement about what the bankers in Europe told him yesterday. I am convinced by what the exchange rate is today, and it is not very healthy.
The public and the House have to face a very serious situation. I do not want to overstate the position, but I do not think that it is possible to do so. It is largely a question of confidence. I agree at once that when the Labour Party came to power in October, 1964, it inherited a problem, but it was a problem and not a crisis. The Government changed it into a crisis. [HON. MEMBERS: "No."] Oh, yes. The right hon. Member for Leyton (Mr. Gordon Walker), who was then the Foreign Secretary, without a seat in the House, visited Washington 10 or 12 days after the election in 1964, on 27th October. There had been time to look at the books. He said in Washington that there was no question of increasing the Bank Rate.
That was one of the first pronouncements made. It was only six weeks after that that the Prime Minister went to Washington with the begging bowl. The Labour Party cannot have it its own way, because Ministers made these pronouncements after they had taken over and looked at the books. The 20 months since the Government took over have brought about one of the worst chapters in the economic history of this country. We have had instant government and look at the result of it. The remedies have usually been too late and ineffective.
More recently, on Monday, 11th July, a statement was issued from Government sources and reported in all national newspapers. The Financial Times reported it as follows:
Although the position of sterling will continue to be watched closely, there are at the moment no proposals before the Government


for extra economic measures to be introduced before September, when S.E.T. comes into force. It is being stressed in Whitehall that S.E.T. will have a considerable effect, taking over £300 million of purchasing power out of the economy. The view yesterday was that sufficient had been done to deflate the economy for the time being.
That was two weeks ago yesterday. The Chancellor was answering a Question the following day and I put a supplementary to him, asking whether he realised that the country and foreigners expected drastic and immediate action. The country was waiting for it. The right hon. Gentleman just put his head down and I did not receive an answer.
At that time something was beginning to happen and three days later the dam burst. Then the Prime Minister elected to go to Moscow. When the President of the United States called him to inform him of the proposed bombing of the strategic targets he dissociated himself from it and thought that a quick visit to Moscow would placate the Left wing of his party. That is what he thought but he made a hasty judgment. If he had had the strength of mind and the courage he would have come to the House, faced it out, and within 24 hours he would have seen that the photographs of the bombing proved that the targets were indeed strategic targets.
The right hon. Gentleman committed himself to going to Moscow on an ill-conceived trip and really got the "brushoff" from the Russians. Mrs. Nehru, who had been there, left that day and the flags were taken down before the Prime Minister arrived. He did more harm than good, and he will no doubt be questioned on this when he visits the United States. What did he do last Saturday? Here was the country confronted with this crisis and he was in Liverpool reopening "The Cavern" "pop" club. [Laughter.] Hon. Gentlemen may laugh, but ask his constituents what they thought about him. Mine in Macclesfield did not think much about him.
Surely if the Prime Minister had a sense of responsibility it was the last thing he should have done. He could well have asked his hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock) to have deputised for him. He ought to have been working on the

economic plans at Downing Street, or making a pronouncement on the economy. The nation does not want this rather cheap popularity, put over so frequently on television.

Mr. Bob Brown (Newcastle-upon-Tyne, West): Surely the hon. Member recognises that this type of "pop" music, which he seems to denigrate, has made a contribution to the economy of the country.

Sir A. V. Harvey: I recognise that. I have two sons. This music "blows away" day and night. Some of it I enjoy. While it has made a contribution to the economy I do not think that Britain's reputation, of Carnaby Street, and being "with it" and all that, has made much impression abroad when we are borrowing money to the extent that we are. However, I certainly do not denigrate such music.
Had the Prime Minister made his statement a week earlier, instead of going to Moscow, I wonder how much he would have saved in sterling which was being spent in support of the £. Figures today suggest £90 million or £100 million. This is a clear case of dereliction of duty. This is an enormous sum of money, belonging to the taxpayer.

Mr. R. B. Cant: On the authority of the Financial Times one must surely accept the fact that the seeping away of our national blood in foreign exchange, and so on, to which the Leader of the Opposition referred, was a consequence of the fact that our importers were going into the leads and lags market and getting their foreign exchange in advance of requirements.

Sir A. V. Harvey: I shall come to that. I have it in my speech and I will cover that point. I am talking about firms covering their position for goods ordered.
The Prime Minister must accept the main responsibility for what has happened—not his Ministers. This has been a one-man band from the time that he took over in November, 1964. He must accept full responsibility. We were told about 100 dynamic days and on another occasion how we were to take the pants off the Americans. We have had all of this silly talk and gimmick.
No one in this debate or during the past week has mentioned Rhodesia. We were told earlier in the year that the Rhodesian problem would be settled in a matter of weeks, not months. I think that Mr. Ian Smith is having a quiet laugh to himself at the way things are going for him. This matter has to be resolved. What is it costing Britain? It must be costing £80 million to £100 million a year. There are loss of exports of £38 million to £40 million a year and the high price of copper and chrome in Zambia.
Of course, Rhodesia is being hurt. The sanctions are beginning to bite. But the Rhodesians will last out longer than we will unless we look to ourselves. This matter has to be resolved. How can we afford to lose £100 million a year in Rhodesia, and what will happen when the problem is settled? They will not suddenly buy British goods.
The same applies to South Africa. Today, there is resistance there against British goods. I do not agree with apartheid any more than hon. Gentlemen opposite do. There is a balance in our favour in trading with South Africa, of £50 million to £60 million a year. It is one of the few countries where there is a favourable trade balance. Until recently most of the gold mined in South Africa found its way into the world via the London bullion market. Even that seems to be drying up today.
We have the Air Force in Zambia and we withdraw a Coastal Command squadron from Gibraltar and announce it in the Press yesterday, in the middle of our negotiations with Franco. I asked the Prime Minister today, at Question Time, about this, and said that it was ill-timed. He said that it was only a coastal squadron. That does not matter a bit. When the 13 million Spanish people read their newspapers today and tomorrow they will think that the British are withdrawing from Gibraltar. No one seems to have considered the problem. I agree that the squadron must be withdrawn, but let us leave it there until the negotiations are over with the Spaniards. The Government do not seem to consider these problems. Their solutions are half-thought-out and half-baked.
The measures put before the country are too restrictive, in my view. Many of them do not bite until well into next

year and there are no incentives and no savings. One hon. Gentleman opposite said that one could not drive the British people. One can take a horse to water, but one cannot make it drink. The same thing goes for the British people. They had a rough war and they had difficult years after the war. They have never had a very good time until the last few years. People are getting better off all the time; they have commitments with mortgages ; some are trying to educate their children and to give them a better chance than they had. They can see all of this in ruins during the next few weeks and months as a result of the policies brought about by this Government. How are young married couples to raise a mortgage, and at what rate? Where are they to live?
I was talking to the president of a large Continental bank last week in London and he was quite impressed by the measures being taken. He told me "Really, there is no speculation as such, or very little. It is firms who are covering their position forward for goods on order, or for which they have to take delivery. They are covering their position in case something goes wrong." He said, "We are not concerned whether the £ is weak today or strong tomorrow. What we are concerned about is good housekeeping". I said, "What do you mean by good housekeeping?" He said, "For our bank, we have HANSARD flown over daily. One of our senior clerks goes through every line of it".
Eighteen months ago, the Minister without Portfolio was winding up a debate dealing with pensions. This was after the Government had got their loans from the foreign bankers. The right hon. Gentleman said, "If they do not like it, they can lump it." That did not go down too well. It is all very well to say that we are being dictated to by bankers, but we borrow money from them ; they have been good enough to lend it. This cuts both ways. We have to have a respect for people trying to help us.

Mr. Mendelson: I would not question the accuracy of the hon. Gentleman's statement about the senior clerk who religiously reads HANSARD, but did he deliberately or inadvertently misunderstand what my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant)


said? He did not deal with foreign bankers. He dealt with people in the City of London who advanced the date of buying foreign currency which is good for them but bad for Britain.

Sir A. V. Harvey: If the hon. Gentleman would like to put the question to me, I will gladly give way.

Mr. Cant: There is a little confusion here. Over the past few days quite a number of businessmen, presumably patriotic, have been buying foreign exchange forward. It is undoubtedly the forward exchange rate which is the weakest part of the situation.

Sir A. V. Harvey: The hon. Member for Penistone (Mr. Mendelson) could not have been listening. I dealt with that point. The majority of people who buy foreign currency forward are buying to cover the situation when they have to take delivery to pay for goods. That clears up that point. [HON. MEMBERS: "No."] The hon. Member for Penistone, obviously, is not enjoying my speech. He is trying to make heavy weather of a minor point. I am making my speech in my own way, and I intend to continue to do so.

Mr. Mendelson: The hon. Gentleman has not answered the point.

Hon. Members: He has.

Sir A. V. Harvey: I have answered the point. My hon. Friends think so. They must be more intelligent than hon. Members opposite.

Mr. Dickens: Mr. Dickens rose—

Sir A. V. Harvey: I will not give way again. We have been asked to be as brief as possible.
Going back to good housekeeping—[HON. MEMBERS: "Running away."] The hon. Member for Penistone must learn to keep quiet. If he does not like my speech, he can go outside and have a drink.
We have had this doctrinaire argument about the nationalisation of steel. If we wanted to get the confidence of the foreign bankers—and the Prime Minister is in for 4½ years ; at least he thought he was-[HON. MEMBERS: "Hear, hear."] I do not think that he will be,

but I will come to that point later. Had he come to the House and said, "We still believe that there is a case for the nationalisation of steel, but there are more urgent things afoot. We shall even leave the Prices and Incomes Bill until the crisis is over", that would have made little difference to vesting date. I am sure that the £ would have strengthened if a statement like that had been made.
Why did the Government announce months ahead that the import surcharge would be taken off next November? They had enough trouble putting it on. They caused bad blood with the E.F.T.A. countries. Having put it on, and the E.F.T.A. countries realising the position that Britain was in, it should have been left on. This could amount to a loss of £150 million. But the Government made the mistake, for convenience sake, two or three months ago at an E.F.T.A. meeting by saying, to appease the E.F.T.A. countries, "We are taking off the surcharge in November." That was bad judgment, because it should remain on. We cannot leave it on now because the E.F.T.A. countries have been told that it will come off.
I want to put one or two propositions to the Government whereby some money could be saved. The Government have ordered military aircraft from the United States to the tune of £1,000 million. Of course, they have not to be paid for yet; I believe that there are credit terms for up to about seven years. Certainly, the Prime Minister will not be responsible for paying back this money. I am the first to admit that there are far too many projects on the drawing board for the aircraft industry, but to "scrub" the lot and to order these aircraft in America, as we have done, has loaded us with an enormous debt for years to come. I do not know whether there are any escape clauses, but the matter should be considered, to see whether we can get out of some of those commitments.
I want to deal with the more immediate requirements of B.O.A.C. and B.E.A. B.E.A. is supposed to be run as a commercial business. Goodness knows, criticisms can be made of it when 400 pilots sign a petition saying that they are dissatisfied with the management. Most people who travel by B.E.A. have had some unfortunate experiences over the


the last year or two with bad time-tabling and discomfort.
B.E.A.'s initial order of 24 Tridents has been delivered. These Tridents were too small. It was always visualised that there would have to be a Mark II. If B.E.A. had had the Mark II in the first place and had worked out the right specification we would probably—I do not put it higher—have had an order from Japan for Tridents. But the wrong aeroplane was ordered. I flew to Malta at Whitsun in the middle of the night, on the cheap rate. We had to land at Rome for an hour to refuel. The Trident could not go to Malta without doing so. There are 15 large Trident 2Es due for service in 1968. The Chairman of B.E.A. says that he will require another 30 to 40 aircraft from 1968–69. I believe that to be true. The traffic is growing, and he must have them in order to compete with other countries. Sir Anthony Millward is on record as saying:
If we could find a British aircraft to compete with the Boeing 707/200 or 737 or a stretched DC9 we will buy it.
At the moment, there is no sign of such an aircraft. He said that a 200-seater VC10 had interesting possibilities if the price could be brought down to the right figure. If B.E.A. has its way it will order aircraft to the tune of £80 million in dollars.
I have spent 40 years in this industry. We have to save foreign exchange. There is nothing wrong with British aircraft. Even if it means subsidising the British Aircraft Corporation to enable it to tool up to build the aircraft—I understand that it will cost £10 million—at least we will save on foreign exchange, and we shall be employing men who want a job in the months ahead. Surely it must be right to order British aircraft for B.E.A. at this time. I hope that the Government will tell us something about this matter during the debate.
There are merits in having a fleet of aircraft of one type. B.E.A. has done quite well on British aircraft, with the exception of the last few months. I am sure that it has to have a British aircraft.
B.O.A.C. has never been British-minded. It has always wanted to buy American when it could. The Conservative Government gave the wrong terms of reference to the new Chairman of

B.O.A.C. They should have told Sir Giles Guthrie, "If the VC10 works, you have to keep it". But £250,000 was spent on propaganda advertising the VC10, saying that it was quiet, serene, sound, and so on. The Corporation spent the next two months of the summer three years ago denigrating it, saying that it was no good and that it was expensive to operate.
This could not have been more unfortunate, because as events have turned out the VC10 is probably one of the best aircraft in the world and a great credit to British craftsmanship. It is quiet and has a wonderful record. It is well sought-after. I admit that it is rather more expensive to operate and to buy, but if we want an aircraft which will take off and land in half the distance of a Boeing there is a penalty for it, and the penalty in this case is weight which must be paid for in fuel consumption. But if the aeroplane is getting a percentage load factor higher than that of Boeings and can offset the increased costs, surely it is doing well as a money spinner.
The Americans are queueing up to buy this aircraft. Surely, in this great crisis of ours, B.O.A.C. and the Government must look at the VC10 Superb, the stretched version carrying over 200 passengers. Even at this late stage, it would be far better, recognising that the Corporations must operate on a commercial basis, for the Government to underwrite losses if, for any special reason, they occur. Clearly, we should be employing our own people and conserving our finances.
I want to make one plea to the Chief Secretary about agriculture, of which very little has been said in this debate. In this country we have probably some of the best farmers and we produce the best food. Our farmers need only to be given the signal, through the National Farmers' Union and the Agricultural Workers' Union, to go ahead and they could produce an extra £100 million or £150 million worth of food a year.
We are told that if we were to do that we would not sell our motor cars and refrigerators to Denmark and elsewhere. The French, however, feed themselves very nearly 100 per cent., but they still have a very good export record. Britain


must try to do this and thereby conserve foreign exchange. Agriculture could make a great contribution.
The Prime Minister, rather reluctantly, last week admitted that unemployment might go up to 460,000. The danger is, once unemployment starts, how does one stem it when confidence has gone and the rundown begins? I am not convinced that it can be stopped at that figure.
Those of us who have seen the problems before must hope and pray. I well remember the problems. When I left the Royal Air Force, in 1930, I had the greatest difficulty in getting a job. Eventually, I got a job by going out to Manchuria and selling aeroplanes at £12 a week. It was a miserable ride getting there and it took me 14 days in the train.
These are different days and people have their opportunities. We cannot have large-scale unemployment. I do not want over-employment, but the measures taken by the Government have been overdone. Had they shown more courage, I think that the Selective Employment Tax would have done the trick with a little bit more. Clearly, however, when the Prime Minister was in Moscow, the civil servants and the Chief Secretary at home all had the cold towels on their heads over the weekend working out what to do. The Prime Minister came back exhausted. One had only to see him on television to realise this. I had never seen him in that state before. What state was he in to sit at the Cabinet table and decide what was best for Britain?
It has been a poor do, to say the least of it. The Government cannot simply go ahead with Socialism. They must do what is right for Britain. I do not ask them necessarily to do things that we recommend. First things must come first. I believe that Britain can pull itself out of this mire, but not if the Government pursue the policies which they introduced last week.

8.23 p.m.

Mr. Michael McGuire: I do not propose to follow the hon. Member for Macclesfield (Sir A. V. Harvey). For more than a moment I thought that we were debating the aircraft industry.
Many a Member listening to this debate must have been reminded of the

catchphrase that was associated with the continuous cinema shows: "This is where we came in". We have seen crises of this kind before, and we have seen this kind of treatment before. Governments always say that the treatment is necessary, and generally they go on to say that the cure will be lasting; and Oppositions always disagree.
If one could view the situation as a comedy, one could be forgiven for thinking it amusing in a traditional sort of way, but it is not amusing. While the remedies proposed might reduce the temperature of the fevered patient, as they have always succeeded in doing in the past, there is no reason supported by history to suppose that they will effect a final cure.
Unlike nearly every other hon. Member, I do not profess to be an economist. If I were an economist, I hope that I should have the grace to be ashamed of my so-called science. Never, so far as I know, has so much credence been given on such slender grounds to economists. Their reputation is rivalled only by the astrologers and, if we are to judge them by their performances—that is, their forecasts—it is just about as well-founded. Had they gone in for tipping winners in newspapers, they would not have lasted a season.
I am sorry to have to say it, but it seems to me that the success or failure of the present rescue operation will be judged on the amount of unemployment that it produces. It is easy to talk about unemployment in a detached sort of way if one is not in danger of suffering from it. A lot of people will suffer, and they will not like it. It will not make their plight more bearable if the experts tell them that it is for the general good.
I remember that when the man who went down from Jerusalem to Jericho fell among robbers, there was only one man who felt sorry enough for him to bind his wounds, take him to the inn and leave two pence with the innkeeper. Words are still as plentiful as they were thousands of years ago, and twopences are still as scarce.
"Redeployment" and "retraining" are transquillising words to use. They give, and are meant to give, a feeling that the Government have the whole thing in hand and that everything will be all


right. But more than words are needed. The raw facts are that redeployment of men and families—because families are concerned—is a very difficult thing to achieve. The notion that unemployment in one area can be remedied by employment in another area is plain poppycock. Men cannot be moved about like pawns. The notion that retraining facilities or even plans for them are available is also poppycock.
One of the expected results of the new economic policies is that a big number of our soldiers, and their families, who are now overseas will return to this country. If they return, the Government will know something about the difficulties of redeployment. To look back upon one's days in the Boy Scouts and to think nostalgically of living under canvas will not help to solve that problem. Accommodation goes with some jobs, and the people who hold those jobs should not let their impoverished imaginations run wild, because if they do there is a danger that they will not be the only things which run wild.
The hire-purchase restrictions on motor cars, even on furniture, may be all very well, but why should anybody think that the working people who aspire to own a refrigerator need to have their appetites damped down? The Joneses have had them for a long time. Why should the Smiths not have them? Refrigerators and reduced costs in milk delivery, for instance, go together. Not to let one's right hand know what one's left hand is doing may be all very well when dispensing charity, but we are not talking about charity; we are talking about economics. The Treasury economists should know that there is a strong economic connection between refrigerators and milk deliveries, or perhaps what is widely suspected is really true, and they still take their milk at blood heat.
Why should washing machines be made hard to get? Must young people setting up house either go dirty or send washing to the laundry? They will have to do one or the other, because they are not making dolly tubs any more, and the Prime Minister knows, after last Saturday's outing, that rubbing boards went out with the skittle groups.
I checked up on one thing today, and 1 was delighted to have my views confirmed. My hon Friend the Member for Salford,

West (Mr.Orme) referred to the candyfloss element, and I have been looking into the position of "one-armed bandits." I was glad to have confirmed that a licence fee is to be imposed, though I believe that it should be more than the proposed £75 on a 6d. machine and £37 10s. on a 3d. machine. That licensing is long overdue, and it could very well be £100. I do not think that anyone could object that it would be hard to collect, because people who keep dogs have to license them, and so do those who keep television sets and radios. It will be a very lucrative source of revenue, and it is one to which not many people can object, save those who try to sell them.
I almost hesitate to mention the amount of currency and the reserve function of the £. Everyone is talking about inflation, by which I suppose they mean the amount of money in relation to goods that is in existence. Who is making it? I know that the Mint makes the pennies and sells them at a loss. Things have come to a pretty pass when 4s. in pennies will bring 5s. as metal. The Mint makes a profit on its so-called silver coins. However, the real money is made on the paper. I have often wondered whether some ill-disposed organisation has muscled in on the business and is printing and circulating bank notes illegally. It cannot be the Government who have done it, because Ministers are always deploring it. I wish that someone would look into the business and stop it.
It seems to many of us that the Vs function as a reserve currency does not help the national economy as a whole. I know that the fact that sterling is a reserve currency is supposed to bring oodles of wealth into the country which would otherwise stay out. However, no one who says that is ever specific as to the amount that it brings in, or who gets it when it comes in. What is quite certain is that the present crisis has been caused largely because the owners of that reserve have been in a hurry to get out of it.
The Government have quite properly set up various commissions to examine various things.

Mr. Stratton Mills: I am sure the hon. Member for Ince (Mr. McGuire) will recall that in 1965 the non-governmental "invisibles" came to £583 million.

Mr. McGuire: I will leave the hon. Member for Belfast, North (Mr. Stratton Mills), if he is called by you, Mr. Deputy Speaker, to give us a brilliant exposition on that one.
I think that the time has come when the whole subject of the use of sterling as a reserve currency should be examined. It may be profitable to some that sterling should continue to be a reserve currency, but what is increasingly intolerable to the country is that, when sterling gets a chill, the country's industry has to go to bed, and the stock remedy is massive unemployment.
I urge the Government to set up a commission to look at this. I think that it will have the support of hon. Members on both sides of the House.

8.33 p.m.

Mr. Ian Gilmour: The hon. Member for Ince (Mr. McGuire) has given a most comprehensive and competent condemnation of all the Government's measures. From his speech, I assume that he will be voting for the Motion.
I sympathise a great deal with what he said, particularly about economists and the folly of thinking like Boy Scouts. This afternoon, the Chancellor said that the best way to answer abuse was to give the facts. In fact, he has not been abused, though I intend to abuse him.
The Chancellor conspicuously did not give the facts. No less than three times he talked about the rise in import prices. What he failed to mention was the rise in export prices. It is true that the price of imports has risen 3 per cent. since January of this year, but the price of exports has risen by 2 per cent. During the time that the Government have been in office, the terms of trade have been singularly in their favour. Export prices have gone up by 5 per cent., whereas import prices have gone up by only 3 per cent.
When he replies to the debate I hope that the President of the Board of Trade will repudiate the idea that the Government have been hard done by as a result of the terms of trade and the rise in import prices, because they have been well favoured by the terms of trade. Rather belatedly, the Prime Minister has also become very much in favour of

facts. During his television broadcast he said:
All our history proclaims that in the British people there are deep reserves of strength and power which are brought out to the full when the people of this country are told the facts and when they are told what has got to be done.
What were the fact which the Prime Minister was telling people only 16 weeks ago in order to bring out these deep reserves of strength? In his constituency, he said:
A new Labour Government's action will strengthen our financial position and make sure that ' never again do we drift into debt'.
We have not drifted, we have plunged.
The right hon. Gentleman was addressing a small audience then, but in a party political broadcast he said:
And the success we have achieved so far in a bare 17 months towards paying our way, towards achieving a lasting economic strength and independence, let this not be underrated.
It would be difficult to underrate it.
This may have been due to the hurly-burly of the election, but a deeply considered statement—and he must have considered it very carefully indeed—appeared in the party manifesto, part of which the Chancellor read this afternoon. He did not read the bit which was rather bizarrely entitled, "Facing the Facts". It said:
During the past 18 months Britain has faced, fought and overcome its toughest crisis since the war.
That may have made our foreign creditors a little surprised.
But even when the Prime Minister was returned with a majority of 100, he still did not face the facts. Even when he was telling the British people what ought to be done, he did not give them the facts. He used the bogus import prices argument again. He said that people had started buying more and more goods from abroad. That is correct, but he did not say that the reason was that the Government had held down production, that it had been utterly stagnant. He referred, also, to the seamen's strike. That argument has also been exploded today. His fourth reason was that the dollar had been having a difficult time.
The Prime Minister is at last learning. This is better than he did last year. In his explanation for the economic crisis


last summer, in his statement on 29th July, be blamed
 the effect of Japan's grave dollar shortage on her purchases from Australia ",
and also
the impact of the Chinese gold buying spree." —[OFFICIAL REPORT, 29th July, 1966; Vol. 717, c. 747.]
Last year, it was Japan and China. This year, it is America. I wonder which country it will be next year. Judging from the excellent maiden speech of the hon. Member for Carmarthen (Mr. Gwynfor Evans), next year it will very likely be Wales.
The Prime Minister has already been strenuously attacked for his handling of the economy, but it sometimes seems to be forgotten that the man in charge of the economy is the Chancellor of the Exchequer. He is responsible for the nation's finances and it is his bungling that has landed us in this situation. There has been some speculation in the Press because the Prime Minister has been devalued about his future, and the Chancellor of the Exchequer has been mentioned as a likely successor. This seems remarkably unfair when one considers the Chancellor's record. As the right hon. Member for Orkney and Shetland (Mr. Grimond) said, the Government's financial record is wholly bad, and is quite clear.
The Chancellor of the Exchequer does not have much in the way of credentials for becoming Prime Minister. It is often said that he is very much concerned about his place in history. If he is not to have a place in history rather like the utterly incompetent Whig Chancellors of the 1830s, the right hon. Gentleman will have to do a great deal more than doctor the record in HANSARD. He will have to doctor almost every speech that he has made, both inside and outside the House, and he will have to blot out almost entirely his two Finance Bills the latest one of which, as the hon. Member for Ashton-under-Lyne (Mr. Sheldon) said, is already irrelevant.
The Chancellor has boasted about his new fingertip controls for the economy, but it is not much use having fingertip controls if one operates them with one's feet. That is what the Chancellor has been doing. It is sometimes said that

the Budget is out of date and that the economy should not be controlled by a once-and-for-all Budget each year. The Chancellor has certainly brought in that reform.
We all know how badly the latest crisis was handled during the last fortnight. The situation was already serious, but the Government talked us into a crisis. The Chancellor and the Prime Minister, as a result of their delay, had to do a demolition job not only upon all their promises and loud words of the last four years and the last two elections, but also on the economy. As an economist—not at all unfavourable to the party opposite—pointed out, they now have a policy of "stop-go-reverse".
What makes matters worse is that the Chancellor has not been able to mitigate his own follies by preventing or taking advantage of the follies of his colleagues. He has been unable to prevent the introduction of the Iron and Steel Bill, and he has been unable to cash in on our special relationship with America. As Mr. Walter Lippmann recently pointed out, this special relationship is one of satellitism to Washington. One advantage of this special relationship might be that we should be able to sell arms to America—but we cannot sell arms to America because hon. Members below the Gangway opposite object to their being used in Vietnam, which is the only place that the Americans would want to use them. Therefore, we do not get any advantage out of our satellitism. We get our debts guaranteed, but are unable to make any money by doing business with our masters.
The Chancellor's excursion into foreign policy has already been commented upon. He has put forward the idea of housing the British Army of the Rhine under canvas in this country, together, I suppose, with the wives and children, but most hon. Members on this side of the House and many hon. Members opposite think that Britain's future lies in Europe, and it is not the best way of convincing Germany and the other European countries that we would be a suitable member of the European Community for the Chancellor, having broken a lot of treaties in the past, to go around threatening to break all our obligations in Germany.
At the weekend the First Secretary said that doctors often disagree about diagnosis and prescription. That is true, but they do not usually agree to end up butchering the patient, which is what has been happening in the last few days. All that the Chancellor is prescribing may make the symptoms less obvious, but it will certainly make the patient a good deal more ill, and make it more difficult for him to recover in future.
After the 1964 election, the Prime Minister, at the Labour Party Conference, said:
The way to a strong £ is through a strong economy, not by creating unemployment, not by holding production down, raising costs, deterring investment and creating the insecurity which breeds restrictive practices on both sides of industry.
Those sentiments have been echoed by hon. Members today. They were wise words. But the Chancellor has so mismanaged the economy since those words were spoken that the Government now feel compelled to do all the things that the Prime Minister then denounced, and with a severity and relish absolutely unparalleled previously.
I was going to follow the suggestion of hon. Members opposite and say what should be done, but they have had a great deal of advice, and as other Members wants to speak I will spare them my advice. The Chancellor has done more damage to the British economy in his tenure of office than he can ever undo. But he could mitigate it by resigning. It is not the First Secretary who should resign, but the Chancellor of the Exchequer.

8.45 p.m.

Mr. R. T. Paget: My first point refers to the escalating costs of the Rhodesian confrontation. I warned the Government at the time how they were climbing out of control. According to the Financial Times of this week, copper will cost us up to an extra £100 million on the balance of payments by the end of this year, and that is only one of the items which have got out of control. To it is now being added the diversion of South African gold as well as of South African trade. We just cannot afford this to continue.
Rhodesia is an independent country. We can do nothing to stop it. We can

make it a poorer independent country, or an independent country which is more dependent upon apartheid South Africa, but we cannot stop it being independent. When we recognise independence, the terms do not matter very much. We had elaborate negotiation on terms with Ghana, Uganda and Nigeria. They were all torn up. Recognition of independence must be upon the basis of good faith and one's influence depends not upon the terms but upon how one gets on with the country and how helpful one is to it afterwards. The runaway costs of this confrontation are something which we cannot afford to see go on.
My main theme is that the case we put against the Tories was wrong priorities. Nobody put it with more eloquence than the Prime Minister. We did not say that their intentions were evil, that they wanted unemployment or did not want production, but we said that when it was a choice between the industrial interests and the financial interests they gave the priority to the financial interests. Thus, the moment production began to climb and financial difficulties occurred, production was made to conform to finance.
We said that that was wrong, that if we were to get production we must make finance the servant of production, and make the value of our currency conform to the needs of the production programme. It must find its value at the level necessary for the production planned. This was the case which we made against the Tories. This was the stop-go policy: the preference given to the financial interest over the industrial.
I remember talking to my right hon. Friend the First Secretary—I was very close to him in those days—back in 1964, and urging him not to take the planner's job unless he was given control of the Treasury. Any planner who cannot control money, which is the instrument which controls production in any price economy, does not have a real job. He has only the pretence of a job, a "phoney" job.
The essence of a planned economy is that the planner controls the money. In my view, the Chancellor should not have been put in the Cabinet at all. He should be a subordinate in a planning administration to a real economic Minister.
I have all along been a critic, sometimes a bitter one, of the present Government. I know that a great many of my hon. Friends reckon that this is bitterness on the part of somebody who was left out. I suppose that we are never entirely successful in analysing our motivation, but I do not believe that that reckoning is correct in my case. I have never suffered from a particularly burning ambition, and I have a feeling that I am a great deal happier as a relatively insignificant freeman than I would be as a great servant. I am not unhappy about my position. Indeed, I think that it suits me better.
It was the decision—it was taken in 1964—to make the maintenance of the £ our first priority that upset me, because that seemed to me to deny everything about which we had ever spoken. It was the acceptance of the Tory thesis, which had been criticised all along—the preference of the City, of banking and of financial interests over industrial interests. I believed that that would lead us to the position at which I came into the party, the position of Macdonald, in which we would find a Labour Government preferring unemployment to exchange control. That is where, it seems, we have arrived.
What about the Measures which have been introduced by the Government? The thing to notice about them is that they are not measures which we have chosen. I do not believe that anyone on the Government Front Bench believes that they will help the economy. Nobody imagines that the economy will be helped by measures that kill investment dead. They are measures which have been chosen because it is believed that they will impress foreign bankers. They are, therefore, measures for the bankers and not for the country.
Save very temporarily, I do not believe that the measures taken by the Government will work. We will be in the same position again, probably in a shorter time, and we will be all the weaker because of the production we will have lost. That is why I say that this is Conservative policy. It is the policy adopted by the Conservatives over the years, and it will not work for us any better than it worked for them. Indeed, it will work rather worse for us because

we inspire rather less confidence in the bankers.
My right hon. Friend the Prime Minister was distrusted because those bankers thought that he was a Socialist. I think he is distrusted now for himself. [Interruption.] What should we do? I believe that the first and essential thing is exchange control. In a situation in which we really believed in the need or a priority of production and in the guidance of the direction of production, that is the first thing about which we would all agree. We agreed about it in 1914 and again in 1939. The very first action we took when we went to war—when production and the guidance of production became essential—was to put on exchange controls. Until that is done one is not the master of the situation and one cannot take a proper decision. At this time we do not need munitions of war but munitions of peace; export and investment goods. It is only if we have exchange control that we will be able to govern that direction.
I turn to the question of devaluation. The right hon. Member for Stafford and Stone (Mr. Hugh Fraser) made an interesting speech on this subject. The effect of devaluation is to increase the profit margins on exports and to lower them on imports, but there are two small but important points to remember. Devaluation does not raise one's domestic prices to anything like the level of the devaluation itself. If one imports about one-fifth of one's consumption, then when one devalues by 10 per cent. that is a 2 per cent. increase in prices and not a 10 per cent. increase. Indeed, it is generally a great deal less.
The second thing is that, according to The Guardian, the Prime Minister said yesterday that if we devalue everybody else will, and that will create a liquidity crisis. Really, what utter nonsense! If everybody devalues, that simply means that the price of gold is raised, and raising the price of gold is the classic method of increasing international liquidity, from the lack of which we are suffering, so that if that was the result it would be admirable.
In point of fact that would not be the result. The result would be that some nations who export to us would devalue with us so that their imports would not be put at a disadvantage, but the nations


to whom we export would not devalue, and that means that the increase of prices would probably be only one-tenth of our devaluation because about half the people from whom we import would devalue with us. But the particular point at which we control our exchange is highly debateable. The one important thing if we are going to get out of these troubles is that in this crisis, which is as serious as wartime, we do control our exchange.
Let us take the question of interest rates. Nobody really sanely imagines that 6 and 7 per cent. is a rational interest rate. It is necessary in order to attract foreign money to support our banking position. It does that, but it makes an awful mess of the shape of our economy. It means that an inflation is imposed on us, because otherwise the burden of debt would be intolerable. If one does not write off one's debts by 3 or 4 per cent. per annum, the weight of a real 7 per cent. would be intolerable.
Before it is possible to begin to make the economy make sense, it is necessary to exercise those controls, that is to say, freeze the sterling balances, make them available for commercial transactions, and control the leads and lags, so that they keep level with commercial transactions.
We have had plenty of experience of it in two wars, and all the time during the 1945 Government. This is necessary to extricate ourselves from our position as world banker which we cannot afford on our reserves. A research project in America came to the conclusion that it did not pay the Americans to run a reserve currency. They get their money from the world at interest rates which are often half those which we have to pay to get ours. That is some illustration of the amount we lose by trying to run that business.
The other thing we have to cut down on is the pretence of being a world Power. We just cannot afford the cost of the Indian Ocean, east of Suez commitment. Merely bringing troops home is not relevant. We should be cutting down on the Fl 11 s, the frigates which are being developed at £20 million apiece for an oceanic role, the aircraft carriers. The "Ark Royal" will be costing us £30 million in a year or two to prolong

its life for a year or two for the oceanic rôle which is beyond us.
We should now be cutting down on the amount of expenditure for a capacity that will not develop for several years. Surely, we should not be cutting down on N.A.T.O. at this time, when we are trying to get European unity and urging General de Gaulle to come in. What do we get for it? After all, we had to cut off immigration from the Commonwealth, and here we shall create an artificial immigration of these men, with all their dependants. When we think of the housing requirement that would result, to bring these people back at this stage is crazy. Agriculture could set off their cost by increasing production for an internal price incentive.
I would not particularly object to this Motion of no confidence in the Government if it were not for the implication that it involves confidence in right hon. and hon. Gentlemen opposite. After all, they were the people who created this mess; our trouble is that we have simply followed them. When we find that the solution advanced by the right hon. Member for Flint, West (Mr. Birch) for this great problem of our being extended as a world bank without the reserves and as a world power without material is prescription charges and charges for school meals, I find that he and his party as an alternative to the present Government present a very unhappy option.
I wish there were a Socialist alternative. I believe that what the country wants is a Socialist alternative. We are not providing it. Socialism is a faith. One does not get it without dynamic drive, and, as we found in the distant days when I first came into this party, the job of driving a leader who does not believe in Socialism to take the path we believe to be right does not work very well.

9.3 p.m.

Mrs. Margaret Thatcher: My first pleasant duty is to congratulate the hon. Member for Carmarthen (Mr. Gwynfor Evans), who made such an eloquent and original maiden speech. He certainly gave us a new interpretation of the Prime Minister's mistakes. I note that he wanted a separate Government for Wales. This would, of course, solve some problems for England, because


presumably he would take with him the right hon. Gentleman the Chancellor of the Exchequer, who would then be able to make as much a mess of Welsh problems as he has made to date of the problems of England and the rest of the United Kingdom.
When in the past we have had periods of stop-go, we have during the period of stop usually managed to solve the immediate balance of payments problem. I believe that this is the first time when we have had a prolonged period of stop —more prolonged than any other—but have not solved the balance of payments problem. We can contrast previous occasions. My right hon. Friend the Member for Flint, West (Mr. Birch) took one of these occasions, that of the Peter Thorneycroft measures which solved a particular set of problems.
I will take the year 1961, when my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) also had a problem on his plate. He also took certain measures; he also borrowed money, but the significant thing is that the money he borrowed from the International Monetary Fund, some £535 million, was repaid within a year and the Bank Rate of 7 per cent. which he instituted for a short time was down to 4½ per cent. within ten months. So at least that period of stop was a good deal shorter than the present one. He took measures. He clearly meant business. The problem was solved, and we were ready to go ahead again with a period of expansion.
This time we have had a period of stop in production for a very long time. The rise in production which began in 1964 finished, in effect, in January, 1965, when the index of industrial production for all industries was 133, exactly the same as the latest figure. We have had stop over all that time.
The Chancellor made certain excuses for our present problems. He spoke about the terms of trade. But they were against us in 1964. In 1965 they were with us, which helped us enormously, and in 1966, it is true, they have turned against us. But I agree with the hon. and learned Member for Northampton (Mr. Paget) when he says that a good deal of this could have been foreseen. Surely the rise in copper prices was fore-

seen just as soon as the Rhodesian crisis broke. Surely the rise in import prices was foreseen just as soon as the Vietnam war was stepped up. These things did not come on the nation as a surprise. They could and should have been foreseen.
The present Government have attempted to make rather too much of an excuse of the seamen's strike. Those who have any personal connection with trade and industry know that the vast majority of our exports got away during that period. The first question one asked was, "How much got away? ", and the answer usually was, "The whole lot". There were certain exceptions, for example, exports to Australia and New Zealand, which did not get away, but the vast majority of our exports got away during the seamen's strike, thanks to the efforts of shipping clerks and transport departments in many industries who arranged for them to be carried in other ships. I said at the beginning of the seamen's strike that we should watch it carefully, because I thought that the Government would try to lay all their troubles at the door of the seamen's strike, which is exactly what they have now done.
I turn now to the general strategy of the Budget, such as it was. I say "such as it was" because it was, in fact, conspicuous by its absence. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said at the time how wrong he thought the Chancellor's timing was. How right my right hon. Friend was and how wrong the Chancellor was. The main purpose of the annual Budget is to plan the course of the economy in the year ahead. As soon as we heard the Budget, we knew that there would have to be another one within a comparatively short time, and we made that point during our debates. Never has a Budget imposed such a large tax burden but left our creditors with the view that it was soft.
It was a Budget which had a certain psychology behind it, the idea that it must not hit the ordinary elector, that anything done must be done in such a way that it did not bring home the seriousness of the situation to the people who by their action could have remedied that very situation. So now we have an extremely savage package of deflationary measures. These are not Tory measures.


I cannot think of any period when we have had such a severe package at any one time.
It is worth while looking at the timetable of deflation as it appears from the latest package. In this July we have the regulator, which, it is said, will produce about £150 million in a full year. We already have the hire-purchase restrictions which will cut borrowing by £150 million, though it is not specified over what period. There is quite a lot of deflation to start with. Then, in September, the period when most economists were in any event expecting a down-turn, several other measures come into effect. The first five months of Schedule F will have to be paid on dividends. The Selective Employment Tax is taken out of the economy at a rate of £90 million a month. In October, for the first time wage-related contributions for unemployment benefit and sickness benefit have to be paid, and this will amount to about £76 million in a full year. In October, the postal rates will go up, amounting to £20 million in a full year. The betting and gaming tax will start then, too. In November, the travel allowance reductions come into effect.
This is an extremely harsh timetable for deflation, but it is not all. The deflation policy goes on into next year. In January, £1,000 million will have to be paid in Corporation Tax and £248 million in Surtax. In February, the reverse position will be true when rebates and premiums start to be repaid. In September next year there will be another Surtax deflationary packet taken out of the economy. Even that is not all. Deflation will continue until 1967–68 with the cuts in investment programmes and the building controls. This is not merely a programme for deflation; it is a programme for contraction. It will mean that we shall go on having a contracting economy for a considerable time to come.
I turn now to some of the sayings of the Prime Minister. He now appears to be resolved to deal with the crisis. We have heard a great deal of this before. It was after the initial crisis in November 1964 that the Prime Minister said at the Guildhall dinner:
 We shall not hesitate to take any further steps that at any time are or become necessary. If anyone at home or abroad

doubts the firmness of that resolve and acts upon their doubts, let them be prepared to pay the price for their lack of faith in Britain.
People did doubt the Prime Minister's good intentions, for a few days later we had the first great crisis of confidence. Bank Rate went up and the Prime Minister came to the House and said that at this particular time a crisis of confidence had developed. So much for the Prime Minister's resolve on that occasion. The House knows what has happened since. There have been successive Budgets and successive measures. So again, in his Prime Ministerial broadcast on 20th July, the Prime Minister said:
We are determined to take action which will show that the people of Britain are ready once and for all to play their full part in putting right the economic weaknesses.
The question which everyone asks is why should we believe him now when he has said it all before and has done precious little about it? This is one of the problems of the present set of measures. No one believes the Prime Minister any more and no one trusts him any more, as the hon. and learned Member for Northampton pointed out. The Prime Minister's problem is that Britain's creditors now understand him perfectly. Because they do so they are suspicious of anything he says. It is very ironic that this is the contribution which the Prime Minister has brought to a nation which built up its trade and financial position on trust. In two years the Prime Minister has destroyed trust in the Government's word. It is not surprising that many people are now hesitating before judging the measures brought forward. They are not judging the measures themselves; they are judging the set of men, headed by the Prime Minister, who brought them into operation.
The Prime Minister missed his vocation. He should not have taken the job of a man of decision but should have stayed as a commentator, for, like sorry wine, he makes excellent vinegar. We had the famous week, that was the week that was, starting on the 11 th July with the report in the Financial Times that the view of the Government was that there was no need for additional measures to deflate the economy. The next day it was announced that there would be no help from the banks for the purpose of


meeting Selective Employment Tax payments, and the next day the Prime Minister cuffed the "Sell Britain Short" brigade. On the Thursday we had the trade figures. Then the Prime Minister came to the House saying that more was needed but he had not a clue as to what it was.
So we had one of the greatest somersaults of all times, a somersault which I think the British electorate will never forget, because I do not think that ever again can they believe what the Prime Minister says.
My right hon. Friend the Member for Flint, West has had something to say about the reserves and the fact that precious little of them belongs to us. We are, of course, in this crisis after all the known solutions have been tried and have failed, after the terms of trade have been with us, after there has been the most massive international support of all time, and after there has been the most colossal run-down of the true reserves. Perhaps people do not realise the extent to which the Government have lived on capital built up before they came to power.
It is as well that previous Chancellors of the Exchequer did not liquidate the dollar portfolio and put it into the reserves., otherwise it would not have been available now. [Interruption.] It never actually went into the reserves—which is just as well. It would certainly have gone before if we had had a Socialist Chancellor of the Exchequer.
We have also had the penalty of the disinvestment of dollar securities, which brought in £70 million last year. Had not previous Governments acted in a way that built up private overseas investment there would not have been enough for the Chancellor to run down now. The final indignity was the Gold Coins Order. making it an offence for anyone who did not hold sovereigns on 27th April, 1966, to buy as much as one sovereign. What an indictment of the Government. It was a ridiculous Order.
There is, of course, the difficulty of telling anything from the published reserve figures. The April edition of the Banker described the Chancellor's statement of 1st March as a
 … virtuoso display of how to juggle with reserve figures".

What a commentary on the Chancellor of the Exchequer. It is also clear from the June Quarterly Bulletin of the Bank of England that during February and March there were a number of borrowings, at any rate to the extent of £54 million, which o did not reflect in the reserve figures.
There was a very obscure sentence in the Bulletin which led the Economist to comment:
This makes the notionally clean reserve figures as irrelevant as the crude figures.
Therefore, my right hon. Friend the Member for Flint, West was right in saying that precious little of our reserves belongs to this country.
During the debate, there have been a number of comments about devaluation. My view, and I believe the viewpoint of the Opposition as a whole, is that we are absolutely against devaluation.

The President of the Board of Trade (Mr. Douglas Jay): As a whole?

Mrs. Thatcher: As a whole. Hon. Members on both sides have expressed their different personal opinions, but I think that my right hon. Friend the Member for Flint, West made the point when he said that if we were to devalue we would, of course, have to repay the colossal amount of debt at a very much higher rate than at the moment. There were severe penalties from devaluation on the last occasion. We devalued in 1949, and in 1951 we had the biggest rise in the cost of living that we have ever had. It hit pensioners extremely badly, and it was not until 1958 that we really managed to pull out the effects of devaluation and give real pension increases. I further believe that those who advocate devaluation are often seeking for a kind of "economist's stone" that will turn everything to gold. They want some simple solution to all our problems. I do not believe that there is ever a simple solution to be found, and it is certainly not that one.
I turn now to an analysis of the package presented to us. My right hon. Friend the Leader of the Opposition referred to the Chancellor's statement, reported in the Financial Times today, about his attitude to the wage freeze. There was, of course, another warning, this time by the First Secretary of State, reported in


The Times of 4th July. The report said:
Referring to a newspaper poll claiming massive support for a wage freeze, Mr. Brown said one course would be to halt all wage increases, but he did not think that was the way to do it.
Even if it could be made to work, with all the unfairness involved to the lower paid, the freeze could not go on for ever and the position would be worse when it came off. The Government would still have to find the answer to making the policy work in the longer term.
So I am not asking for the freeze. I am not saying that nobody should put up prices, declare increased dividends, and get increased wages and salaries. What I am saying is that they should all be examined '.
So we are in the difficulty that it looks as though we are to have a freeze. The Prime Minister said that he would not enforce it by elaborate statutory controls, which presumably means that he is prepared to enforce it by statutory controls. My right hon. Friend the Leader of the Opposition thought that if it came it should be voluntary. The Prime Minister, then, is prepared to have statutory controls, the First Secretary does not believe in it, and the Chancellor of the Exchequer does not rate it very highly when he is talking to our European friends.
This scarcely seems the way to introduce a wage freeze or encourage the trade unions to take part in it. Moreover, on the day when it was announced the position was made extremely difficult, because those who had already had increases granted wanted to know what the position about those increases was and they were given conflicting replies. For example, Gas Council officials were insisting that the 4 per cent. award would be paid and Department of Economic Affairs officials were telling union leaders that they were stalling it. What a way to run a Government! What a way to try to inspire confidence in anyone!
I turn now to the cuts in expenditure for nationalised industries. It is difficult to analyse these, because they were given in detail only yesterday in answer to a Question, but I note that in the Sunday Times this week it was suggested that a reduction for the electricity industry of the size proposed would mean cutting right back on the work of reinforcing the local cable network. Cutting this expenditure would mean that the

slightest accident or overload could black out a fair sized suburb, and one doubts whether it is wise to take that risk in these circumstances.
But perhaps the cut is more fictitious than real, as with a number of other proposals, but if there can be a cut of £24 million in the electricity industry without undue difficulty, as the Chancellor seemed to indicate at the beginning of the debate, it would seem to show that the electricity people have been very wasteful if there can suddenly be a cut of £24 million without any effect. At any rate, personally I think that these cuts should be viewed with considerable suspicion.
A year's advance payment for telephone rentals is to be demanded. Are old folk to be exempt from that requirement? Many of them must have telephones and need new telephones where they have not yet been installed.
The private building and office controls will not bite until 1967, which once again means that the Government are continuing the inflation until that period.
As various hon. Members from this side of the House have pointed out, there is a tremendous lack of incentives in the present package, in sharp contrast with Mr. Butler, now Lord Butler, when he had a similar situation to cope with from 1951 to 1953. It was noteworthy that in a poll published on 24th July, the majority of Britain's leading industrialists said that they would emigrate if they were younger men at the start of their careers. They felt that the present economic crisis was but one in a series of crises still to come.
This is perfectly true in the lack of an incentive policy in taxation. I note that there is a 10 per cent. charge on Surtax which will take Surtax levels almost back to where they were for one year in wartime. It puts up the top rate to some 19s. 3d. in the £, which is no encouragement to those extremely able people upon whom we depend. The hire-purchase restrictions and the regulator were expected. I have noted that the effect of the regulator will be reduced because of the action of my right hon. Friend the Member for Barnet (Mr. Maudling) in reducing Purchase Tax. In one of his Budgets he reduced the top Purchase Tax considerably.
Most of us regret the cuts in information services overseas. On hotels, we wish that the Government would make up their mind. They are doing away with investment allowances and have added the Selective Employment Tax to the difficulties of the hotel industry. Then they attempt to give a little bit back in loan assistance. I hope that the President of the Board of Trade or the Chancellor will give some clearer guidance to close companies. As the Chancellor knows, they are told to increase their dividends and they suffer considerable penalties if they do not. Who are they to believe? Are they to believe the latest statement that they must freeze dividends, or are they to believe the inspector of taxes who will tell them that they have to increase dividends at certain times? Ought we not to have a new Chancellor's umbrella? There have been a considerable number of positive proposals put forward on previous occasions. Many of us have said what we feel should be done to produce an efficient economy and to get the economy towards expansion once again and out of its present difficulties.
Many of these measures were taken by Mr. Butler, as he then was, in 1951, towards 1953, when he faced a deficit running at the rate of £800 million a year and faced a loss in the reserves in the second half of the previous year of some £547 million. He, too, announced an emergency Budget in November, followed by a very serious Budget in April. The following year he announced an incentive Budget and introduced cuts in taxation—a completely different approach and attitude from that of the present Government.
I would suggest that if we are to move forward once again we must concentrate on some of the policies of modernisation. This means dropping the new system of incentive grants, because these mean that allowances are given regardless of profitability. We believe that the old system was a good deal better. It means dropping the development levy on industrial development, contained in the Land Commission Bill, whereby an industrialist who develops his land has to pay 40 per cent. levy. This is quite absurd. It also means dropping the present Selective Employment Tax and premiums to industry, which would result in keeping in

business those who are inefficient and who ought to go out.
That would mean that we should have a good deal more competitiveness in industry. If the Prime Minister is in earnest, he should instruct the Royal Commission on Trade Unions and Employers' Associations to report within six months, with a view to taking legislative action. I would suggest, too, that he tightens up the Restrictive Trade Practices Act along the lines prepared by the last Conservative Government, and deals with the taxation system which persuades top men and women to stay in Britain. We have had a very considerable deflationary package presented to the House. We have no lack of confidence in the British people, but we have no confidence whatever that this Government has either the will or the ability to put matters right.

9.24 p.m.

The President of the Board of Trade (Mr. Douglas Jay): I have noticed in this debate today what is perhaps a very natural wish to believe that some alternative policy must exist or some device must be available which offers this country an easy and painless way out of the difficulties of living and earning its living in the modern world.
The Leader of the Opposition, if he thinks that there is one, certainly did not tell us very clearly what it is. He proposed that we should move to what he called an open plain of opportunity and his only precise proposal was to put a new tax on food imports. Anyone who really believes that there is some easy way out of these difficulties does not understand how ambitious are the aims which we have set ourselves as a nation.
If we are to maintain something like ½per cent. unemployment with over 20 per cent. of our national income staked in international trade, and we are expected to maintain a flow of civil and military aid to poorer countries, and to do it in a world where international currency reserves are increasingly inadequate, then the margin of safety between deficit, on the one hand, and deflation, on the other, is bound to be narrow. In such circumstances, we cannot afford, even for a short time, the luxuries of a shipping strike or of a runaway price inflation.
With adequate expanding gold supplies or credit in the world, this would be less


difficult. But the world's currency reserves, despite all the efforts at reform of the United States, ourselves and the Commonwealth countries in the last few years, have been expanding even more slowly than they did in the years leading up to the 1929–1932 depression. That is, of course, why both the United States and the United Kingdom during the last three years have been compelled, much against their will, to restrain both overseas investment and aid, to the injury or less fortunate nations. That is why interest rates are tending to rise all over the world. I think that a very heavy responsibility will rest on anyone who frustrates much longer all attempts at modernisation of the world currency system.
All this affects us more acuately than most, not merely because we are managers of a reserve currency, but as a nation so heavily involved in international trade. Our exports today represent 16 per cent. of our national income compared with about 10 per cent. for Japan and 4 per cent. for the United States. When one looks at events in perspective, one sees from these and other figures what a remarkable effort this country has made in increasing its exports to meet the challenge since 1945.
It is a remarkable fact that between 1900 and 1938 there was no increase at all in the volume of United Kingdom exports. Nevertheless, between 1946 and 1965, our exports rose in volume by 150 per cent.—that is, they more than doubled. As a result, while, in 1938, our exports were paying for only two-thirds of our visible imports, last year they paid for 95 per cent. of them. Indeed, our exports both to the E.E.C. and E.F.T.A. —curiously, it is the same figure in each case—have risen by 70 per cent. since 1960.
At the end of 1964 and throughout 1965 the present Government put into operation a whole series of new export incentives, services and export promotion measures which I described in detail in the Budget debate. What have been the results since then? It is worth looking at the figures. In 1964, before these measures were put into force, world trade in manufactures rose by 15 per cent. in value, and total United Kingdom exports by 5 per cent. In 1965, world

trade rose by only 11½ per cent., but United Kingdom exports rose by 7 per cent. In that year, United States exports rose by only 5½ per cent. During the first five months of this year, before the shipping strike, total United Kingdom exports rose in value by 9 per cent.
In volume, our exports rose 3 per cent. in 1964, 5 per cent. in 1965 and 6 per cent. in the first five months of 1966, or faster than the National Plan target of 5¼ per cent.—a creditable response by British industry to the new facilities and services offered to it. Over the first six months of this year, even including the strike month of June, our exports to Canada are 17 per cent. up in value and to the United States 32 per cent. up. To the Soviet Union, in the first six months of this year, our exports have risen by 27 per cent. and to Eastern Europe as a whole, excluding the Soviet Union, by 36 per cent.
I warned the House in the Budget debate that we must reckon on a rise in the value of imports this year since we successfully held down the rise to only 1 per cent. in 1965 and since our national income and output are rising. So far, in the first five months of 1966, partly due to higher prices, imports have risen in value by 7¼ per cent. above those for the corresponding months of 1965. Therefore, despite this rise in imports, the visible trade balance up to the time of the shipping strike had improved a little further this year. Neither our visible trade balance nor our commercial invisibles, apart from tourism, had given any pretext for a psychological shudder in the exchange markets.
What, then, has caused the present difficulties? The first cause, as almost all hon. Members in the debate have recognised, is that Government expenditure overseas, desirable as it often is, in civil and military aid has risen far too high—for instance, in Germany in particular. Secondly, import prices, as the hon. Lady the Member for Finchley (Mrs. Thatcher) recognised, have risen faster than export prices this year. Thirdly, the shipping strike, while damaging in itself, led to exaggerated deductions from the June export figures.
I agree with the hon. Lady, as to the June export figures, that some people might think it highly creditable to British


industry to get £350 million of exports in a month when outward sailings of British ships had come practically to a standstill. Nevertheless, the hon. Lady would be quite in error in suggesting that the shipping strike had no effect on our exports in June. The figure dropped from about £420 million to £350 million, clearly due to the shipping strike. The deductions drawn from this in the foreign exchange market, however, were exaggerated.
The export figure can reasonably be expected to recover from the June total as the effect of the strike wears off. We shall not, however, as a Government, rest content with the whole series of export promotion schemes which have been launched in the past two years. We are preparing further new measures. To give some examples, I believe that there are practical possibilities of expanding mail order export business, and I am investigating these with those who are most experienced in the trade. Secondly, the Export Credits Guarantee Department is examining the feasibility of extending the very successful financial guarantee scheme to direct loans to buyers in certain cases below the existing £2 million minimum.
Thirdly, we shall extend to Germany in September the operation, which has proved effective in the case of the United States, Canada, and Australia, by which British commercial officers from those countries visit systematically a number of British firms in this country and stimulate exports. I have also decided to introduce a scheme, which was mentioned by my right hon. Friend the Prime Minister and of which the hon. Lady the Member for Finchley asked particulars, for encouraging our own tourist industry to expand its earnings with the help of development loans from the Government. In response to the hon. Lady's request, I will give some details.
The scheme will have to be selective and not indiscriminate. The loans, therefore, will be available only for hotels which can show that capital expenditure on new buildings, building extensions or new installations of fixed equipment will result in significant new or increased earnings from their overseas visitors. The rate of interest to be payable on the loans will be the Exchequer lending rate, and the maximum period allowed for repayments will be a term

of 15 years. For any given project, the loan will not normally exceed 50 per cent. of the cost of the development, and there will be a lower limit of £10,000 for each loan. The scheme will operate initially for one year, and the total of the loans to be approved during that year will be up to £5 million. We shall consult representatives of the industry about the working of the scheme.
Nevertheless, this and all the previous export promotion measures, however energetic, will be frustrated if we allow the level of home demand to pull back potential exports into our own markets. Without the restraints announced by the Government last week, I do not believe that our exports could have been expected in the second half of this year to continue the encouraging rise which we achieved up till the summer. The evidence seems to be overwhelming that, in 1964 and 1965, and potentially again this summer, the rise in income and demand had reached the point at which exports were being sucked back into the home market. In the summer and autumn of 1964, as the right hon. Member for Barnet (Mr. Maudling) will remember, exports actually fell. That was one main reason why we had sunk into such hopeless deficit by November, 1964. If the Tory Government of that summer had acted in July, the slide of that autumn could have been avoided.
After the restraints imposed at the end of 1964, exports began to rise in the first half of 1965, but were again flagging in the summer months. Had we not introduced the further curbs in demand which we did in July of last year, all the signs are that we should not have achieved the strong upward rise of exports last winter and spring. But now I believe that an excess demand similar to those of the summer of 1964 and 1965 has begun to appear again. Numerous exporters have told me recently that it is shortages of skilled labour and components and the shortage of manpower generally due to the pressure of home demand which are holding back exports, and not shortage of orders. With unemployment down nationally to 1·1 per cent., incomes and retail prices rising and imports pressing upwards, it is unquestionably prudent to act now and not let things slide as right hon. Gentleman opposite did in 1964.

Mr. Reginald Maudling: If the pressure of demand in October, 1964, was so high as to frustrate exports, why did the Government say in 1964, in their White Paper, that there was no undue pressure of demand?

Mr. Jay: We said that there was an undue pressure of demand—[Interruption.]. If right hon. and hon. Gentlemen opposite will let me finish, we said that there was an undue pressure of demand after measures had been taken to check imports, and that was what they did not do. [Interruption.] The right hon. Member for Barnet has not followed the story. It was the checking of imports which led to the excess of demand and it was his failure to do it that led to the trouble.

Mr. Maudling: The White Paper in October, 1964, said quite clearly that the Government had found no undue pressure of demand on resources. If the right hon. Gentleman cannot remember those words, he should.

Mr. Jay: What the right hon. Gentleman still does not realise is that that referred to the period before the measures were taken to check imports. If he looks at the White Paper again, he will see that that is so. For that reason, we do not intend to repeat those mistakes now.
This afternoon, fears have been expressed, which I am sure are sincere, that the Government's measures may involve massive unemployment, or outright deflation. No one who examines the figures, rather than some of the wild assertions that are knocking around, will find evidence for extreme estimates of that kind. We heard exactly the same fears expressed in the debate last July, some of them from the same people. All the same predictions about heavy unemployment were made then.
During the debate on 28th July—the dates are almost always nearly the same—I replied—to the sceptism of some hon. Members—that serious unemployment was not to be expected and that the Government's measures were "curtailing excessive demand" and not imposing outright deflation. What happened, in fact and not in mythology? Unemployment, which was 1·2 per cent. last July, rose to a winter peak in January of only 1·5 per cent. and is now 1·1, but the effect on

our exports and imports was to bring the situation nearer balance by the end of the year.
If anyone thinks that the policy announced last week will produce a disastrous effect on employment, let him look at the figures. The Government hope to curtail home demand by about £500 million a year below what it otherwise would have been. But total final expenditure in this country today is running at about £40,000 million a year and rising at about £2,500 million a year. Even total consumers' expenditure is now running at about £23,000 million a year, and rising at about £1,500 million a year. Therefore, although £500 million sounds a lot when the hon. Lady the Member for Finchley adds it up item by item—

Mr. Cyril Bence: It is a lot.

Mr. Jay: —and she got the arithmetic right, it represents little more than 1 per cent. of total expenditure, and only 2 per cent. of consumers' expenditure which is itself rising at 6 to 7 per cent. a year. This merely represents a rather smaller figure than the annual increase going on at the present time. Nobody who looks at these figures, and not at his own preconceptions, can believe that some of the more gloomy predictions made in the last few days will be justified.
On the other hand, I believe that these curbs will mop up sufficient excess demand to improve, as last year, the balance between exports and imports. A rise in our total export earnings, visible and invisible, of £150 million above what they would have been, and a fall of £150 million on our imports and overseas spending, would be decisive for our balance of payments. Yet £150 million is only 2 per cent. of our total earnings overseas, or of our total spending overseas. This is why comparatively small adjustments of home demand can be decisive for our balance of payments, and, because of the inadequacy of our reserves, about which many hon. Members have spoken, decisive also for the strength of sterling.
What these measures will do, I believe, by reducing the excess home demand, is to allow resources to shift into production for exports. In the congested areas manpower will be taken on by firms now acurately short. But we are also now achieving a far more even spread of


employment over the whole country, and the new selective measures of building control and office control will speed up this improvement still further.
Unemployment in the development areas is now lower than it has been at any time for 10 years or more. The Board of Trade is now building, or planning to build, 73 advance factories in these areas. They are wholly exempt from the new deferments, and they are only one part of the development programme going forward in these parts of the country.
Since the 40 per cent. new investment grants were announced for development areas in January, there has been a marked increase in the demand for factory space in these areas, especially in Wales, which was particularly neglected by the party opposite, and where the Ford Motor Company is planning large expansions of employment at the Swansea plant, which is, of course, close to the coal mining area. I am sure that this will be welcome to the hon. Member for Carmarthen (Mr. Gwynfor Evans), who made an eloquent speech, but who has not stayed for an answer.
As a result of these successful policies the spread of unemployment between the fortunate and less fortunate regions is being evened out. The right hon. Gentleman may like to know the figures. In July of this year the spread between the most fully employed regions, at 0·7 per cent. and the least fully employed, at 2·4 per cent., was 1·7 per cent. In February, 1963, at the unemployment peak, it was 3·6 per cent. This evening out of employment over the whole country means increasingly that the effect of disinflation is to get manpower into more important jobs and not to throw people out of work.
The policies announced this week will help to carry this process even further. By exempting the new wider development areas entirely from the tighter building control, and by extending the office control in the congested areas we are intensifying the relative priority now given to the development areas. I intend, also, during the period of these measures to intensify still further the industrial development certificate control in the congested areas, but to continue to grant I.D.C.s freely in development areas.
It is not only geographically that these restraints are selective. Pensions, insurance benefits, housing, hospitals, health and schools are entirely exempt. This means that all these are given a new and greater priority over the less essential forms of building and of expenditure which are being temporarily restrained. I believe, therefore, that much the greater part of manpower released from the less essential jobs will be put to work on exports and other more valuable tasks, and not left idle. But if this is to prove wrong—and we can all be proved wrong in our predictions—and if these new restraints prove more than was necessary to correct the balance of payments, and unemployment increases seriously, it is quite possible to relax.
In those circumstances, it would certainly be the intention of the Government to do so. Both the regulator control of indirect taxes and hire-purchase restrictions can be varied up or down at a few hours' notice, with an immediate effect on the economy. I do not know why it upsets the right hon. Gentleman so much to think that there is a prospect of relaxation; it is not beyond the bounds of possibility.
Simultaneously with the transfer of manpower to exports, or to import saving, it is certainly necessary to raise output per man, or productivity. That we are doing and shall do, for instance, in the shipbuilding industry, where my Department, together with the shipbuilding unions and management, have been pressing on with the Geddes proposals. The right hon. Member for Flint, West (Mr. Birch) asked about restrictive practices. Already in the shipbuilding industry the boilermakers have agreed to work out a major demarcation agreement. Five local interchangeability agreements have been concluded and the unions have agreed that the Shipbuilding Industry Training Board should provide training courses for shop stewards. In addition, two shipbuilding mergers have already taken place and others are planned as a first step towards the regrouping of the industry. The Government are pressing on with all these proposals.
At the same time, to combat restrictive practices generally on the management side of industry the Monopolies Commission—and the right hon. Member the


Leader of the Liberal Party has always asked for this—is working faster and more energetically than it did under the previous Government. Six references have been made to the Commission in the past 18 months; seven are now being investigated; four reports have been made, and three have been substantially accepted and, where appropriate put into force by the Government. We mean to proceed vigorously in this campaign against restrictive and monopoly practices on both sides of industry.
The complaint of the Leader of the Opposition today—and his speeches have not been notably helpful to sterling—seems to be not that these measures of restraint should not have been taken at all, but that they should have been taken earlier. I suppose he thinks, or they are trying to say, that taxation ought to have been raised more steeply in the Budget in May. I would like to know, then, why he did not say so at the time. If that is the complaint, why did he and the Official Opposition vote against the tax increases in the Budget and go on voting against them throughout the summer, as the Opposition's one contribution to a problem which they now say can he cured only by more restraints and not by less?
Now that excess demand has again been checked, there is no reason why exports should not forge ahead in the coming months as they did after last July. Of course, it will be a long and hard struggle to get even our current balance of payments into steady surplus —nobody should be under any illusion about that—but it is perfectly within our power, given the necessary resolution and restraint. Our prices are very widely competitive in world markets to-

day. We are already the largest exporters in the world of a number of products from farm machinery to commercial vehicles and from wool and textiles to washing machines and aero-engines. It is delayed delivery dates which have been holding us back.
The one thing now which could defeat our exporter's efforts would be a runaway rise in costs and prices. We are, after all, and have been for 15 years, fighting a fierce price and costs battle with very keen competitors. Surely, then, a six months' standstill—only six months —and another six months' restraint is a premium worth paying for victory in this battle, which is so nearly in our grasp. There are many pensioners who experience much more than a six months' standstill in increasing their incomes.
Such restraint would transform our prospects on the export front and everyone who knows the keenness of the export struggle believes that that is necessary. Provided that it is fair and that it applies to prices and dividends as well as to wages and salaries, there is no question that the national interest demands it and that a very heavy responsibility will rest on anyone who deliberately seeks to undermine it.
I believe that a Government who have controlled rents, who have imposed a Capital Gains Tax, who have raised Surtax rates, who are applying the same curbs to prices and incomes, who have substantially improved pensions and other social benefits and who plan to do so further, not merely have the right to ask for such a standstill, but have the national duty to make it succeed.

Debate adjourned.—[Mr. Harper.]

Debate to be resumed Tomorrow.

LESOTHO INDEPENDENCE BILL [Lords]

Order for Second Reading read.

9.59 p.m.

The Secretary of State for the Colonies (Mr. Frederick Lee): I beg to move, That the Bill be now read a Second time.
I have it in Command from the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Bill, has consented to place Her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
In his inquiry into the nature and causes of the wealth of nations, Adam Smith made the following dogmatic assertion:
To propose that Great Britain should voluntarily give up all authority of her Colonies, and leave them to elect their own magistrates, to enact their own laws, and to make peace and war "—

BUSINESS OF THE HOUSE

Ordered,

That the Proceedings on Government Business may be entered upon and proceeded with at this day's Sitting at any hour, though opposed.—[Mr. Lawson.]

LESOTHO INDEPENDENCE BILL

Mr. Lee: I was quoting Adam Smith's assertion:
To propose that Great Britain should voluntarily give up all authority of her Colonies, and leave them to elect their own magistrates, to enact their own laws, and to make peace and war, as they might think proper, would be to propose such a measure as never was, and never will be, adopted by any nation in the World.
The Bill now before the House deals with one example of the constitutional transformation which Adam Smith told the world it would never see. It provides for the establishment of Basutoland under the name of Lesotho as an independent kingdom within the Commonwealth. In accordance with the agreement expressed in paragraph 10 of Command 3038, the Bill sets 4th October, 1966, as the date on which it shall become independent, and makes provision, on the lines of other independence Bills, for certain matters consequential upon independence.

There has been a good deal of interest in the assumption by the Southern African territories of independence. Later tonight my hon. Friend will be introducing a similar Bill for the Republic of Botswana, and these two territories will achieve their independence within a few days of one another. They have some history in common, including recent constitutional progress, and in both cases the various stages in constitutional progress have been preceded by local constitutional commissions, and—in respect of independence constitutions—have been followed by constitutional conferences to discuss the details. Parliament has been informed of these matters in the relevant White Papers.
Concerning Lesotho, some criticism has been directed against me for what is called rushing them into independence. The Basutoland Government, and, until the last elections, the Basutoland political parties, would certainly not have agreed with this criticism. The independence constitution, which will be made under the Royal Prerogative following the passing of this Bill, will follow the recommendations of an all-party Constitutional Commission which was appointed in 1962. It was the aim of this all-party Commission to devise a constitution which
 … after a defined interim period of preparation might with minimum changes and maximum ease become the constitution of an independent Lesotho".
Thus, that Commission's recommendations, in effect, did two things. They set out the terms of the Basutoland Constitution which came into effect in 1965, and they indicated that the provisions of that constitution should, with few changes, carry through to the independence constitution.
I will return to these points later, but 1 draw the attention of those who complain that we are rushing Basutoland into independence to a particular recommendation of that Commission, which was that the date for independence should be fixed at a year after the first elections under the new constitution. The elections under that Constitution were held at the end of April, 1965. That all-party Commission would not, therefore, agree that independence on 4th October, 1966, was being rushed.
This is not an isolated view. During my recent talks with the Paramount Chief of Basutoland he asked me clearly to understand that neither in his mind nor in that of anyone else in Basutoland was there any doubt about the desirability of independence. Hon. Members will be aware also of the various exhortatory resolutions that emanate regularly from the United Nations. In December, 1963, we were asked to provide for immediate independence for the three Southern African territories. Two years later the same request was made.
In June of this year, that is, after the long debate in Basutoland itself on the independence resolutions, the Committee of 24 again called upon us to fix an independence date for Basutoland; and even later than that, on 8th July, after hearing petitioners from the two Basutoland opposition parties the Committee recorded that a universal desire had been expressed that the independence of Basutoland should not be delayed. I do not think that in the face of all this demand and exhortation the United Kingdom could be accused of "rushing the territory into independence".
It has also been urged upon me that should call for fresh elections before independence. Those who are most vociferous on this point are, as one might expect, members of the parties who were defeated in this Basutoland elections of April, 1965.

Sir Gerald Nabarro: Hear, hear.

Mr. Lee: It is a habit of opposition parties. I have felt the same way myself at times.
When the Report of the Basutoland Constitutional Commission was discussed by my predecessor, the right hon. Member for Streatham (Mr. Sandys), with the all-party Basutoland delegation in the summer of 1964, the conference and all of the delegates, including the Paramount Chief, signed the Report. They were then drawing up a Constitution for a short defined period before independence, and that Constitution was to carry over—with a few necessary amendments—to independence. Elections were held about a year after the Constitutional Conference and, of course, after the interim Constitution

had been promulgated, at which time, therefore, the Basutoland people knew precisely what they were doing. They were electing a Government which would carry them through to independence on the basis of a Constitution whose framework had been agreed in 1964.
The Basutoland National Party won those elections by a narrow majority. In the months that intervened before they came to London in June, 1966, with their request for independence, the Government there slightly improved their electoral position. In accordance with the agreements reached at the 1964 Conference they asked for independence on the basis of the Constitution whose framework had been agreed in 1964. My predecessor had in the 1964 constitutional discussions wisely insisted that a resolution asking for independence should be passed by both Houses of the Basutoland Parliament. In due course, such resolutions were passed, and they were brought to London by the Prime Minister and the Basutoland Government.
In these circumstances, there was no justification whatever for my insisting on fresh elections in Basutoland before independence, and, despite very heavy pressure from those who rightly or wrongly considered that they would gain if fresh elections were held, I declined to do so. I am certain that this decision was the right one.
A further matter which, though not very agreeable, I must bring to the notice of the House is the disagreement between the Basutoland Government and the Paramount Chief. My noble Friend Lord Beswick referred to this in the debate on 14th July, in another place. Hon. Members will be aware that, although the Paramount Chief signed the Report of the 1964 Constitutional Conference and, therefore, knew quite well what his position would be both in the present Constitution and in the independence Constitution, he has now taken up a position in opposition to his Government and has sought much wider powers than it was intended he should enjoy.
The House will, I am sure, understand the position if I say that one of the obvious changes that had to be made as between Basutoland's present Constitution and its independence Constitution


was the withdrawal of the powers in relation to foreign affairs, defence and internal security which the British Government representative at present enjoys.
Among the things that were made clear in the 1964 Constitutional Conference Report were, first, that the British Government representative would be empowered to delegate his responsibilities in these matters to the Basutoland Government and not to the Paramount Chief; and, second, that under the independence Constitution the Paramount Chief would be Head of State with the powers, functions and privileges set forth in the Constitution itself.
Despite this, when the independence resolutions were being debated in Basutoland the claim was advanced that the Paramount Chief and not Basutoland's Ministers should inherit the powers of the British Government representative. Amendments to the independence resolution to have this effect were moved and were decisively defeated in both Houses of the Basutoland Parliament. Nevertheless, the Paramount Chief has persisted in what I must regard as a most unwise policy of opposition on this and other issues to the policies of the Government of Basutoland.
During the independence talks last month, I tried on three separate occasions to persuade the Paramount Chief to desist from a course of opposition to, his own Government which I knew would divide the Basutoland people and bring the great institution of the Paramountcy in Basutoland into such disrespect in the territory that its survival would become somewhat questionable.

Sir G. Nabarro: Is the right hon. Gentleman talking about Paramount Chief Jonathan?

Mr. Lee: No. The present Paramount Chief is the Queen's representative. Chief Leabua Jonathan is the present Prime Minister in Basutoland whose Government the Paramount Chief is opposing, quite contrary to his vows in this matter. I am now very much afraid that, if the Paramount Chief goes on in this way, the whole institution of the Paramountcy may well be brought into disrepute and disrespect in Basutoland itself.
It is a matter of very considerable regret that, since his return to Basutoland,

the Paramount Chief has not followed the advice which I thought it right to give. I was particularly glad to note that in another place the noble Lord the Duke of Devonshire, who has knowledge of these matters, supported the advice which my noble Friend, Lord Beswick, had given to the Paramount Chief. I very much hope that this House, also, will agree that it was sound advice and that the Paramount Chief should follow it.
It is quite clear to anyone who has studied these matters that the status of the Paramount Chief was not only debated exhaustively in the recent debates leading to the passage of the independence resolutions in Basutoland, but was also discussed quite exhaustively by the Constitutional Commission in both 1962 and again in 1963. I felt, and I still feel, that I was on very firm ground in advising the Paramount Chief to accept the honourable position which his people wanted for him.
I felt sure that the support that at least one of the Opposition parties in Basutoland was giving him in his campaign for greater powers was, if I might say so, somewhat tactical support. Certainly, if those in that party came to power they would have no part or parcel in agreeing to that which they are now advising him to do.
I am still of that view. The Paramount Chief in Basutoland is in a very exceptional position. He has all the honourable functions of a constitutional monarch, and others, also. He, and he alone, is the person in whom their land is vested in trust for the nation. He exercises very considerable direct power, therefore, over land. He is at the head of the offices of chieftainship. There is in Basutoland an immense amount of respect for his office, and I would emphasise again my conviction that he is not serving the best interests either of Basutoland itself, or the Paramountcy, by persisting in the pursuit of policies in opposition to those of the Government of the day.
I should, perhaps, add that the independence Constitution was drawn up on the assumption that the Paramount Chief would accept the honourable position set out for him. If this assumption is belied, I think that it would be reasonable for Her Majesty's Government and the Basutoland Government to consult on


what additional constitutional provisions might be necessary in the independence Constitution to ensure that the Head of State could not wilfully prevent its operation and maintain his position as Head of State.
I should like now to turn to the last point which I think has been worrying a number of people, and that is that Basutoland is still so weak economically that it will not be able to sustain its independence. This criticism is linked with the criticism that we have done virtually nothing to assist Basutoland's development, and that it is still possible, if we wished to do so, to make the territory less dependent on South Africa than is the case at present. That, broadly, is the kind of criticism that has been made.
The proposition that economic weakness is a bar to independence has long been outmoded. It is not, of course, a healthy state of affairs when an independent country depends on another country for financial assistance to meet its recurrent budgets. But Basutoland will not be the only country, by any means, in this rather sad state. Hon. Members will recall that my right hon. Friend the Minister of Overseas Development told the House on 1st July that Her Majesty's Government had assured the Basutoland Government of their willingness to assist Basutoland to meet its needs in the fields of budgetary and development finance after independence.

Sir Douglas Glover: For how long?

Mr. Lee: We shall see for how long they need it.
It is absolutely untrue to say that we have in the past done nothing to assist Basutoland's development. Between 1961 and today the United Kingdom Government have provided for Basutoland in colonial development and welfare and grant-in-aid assistance the sum of £11 million. Going back further to the period when Basutoland's finances were not grant-aided, we find that the figure between 1946 and the present day is £13½, million.
Many hon. Members know this territory, and know the nature of the problems that have faced us in it. I do not wish to minimise the problems in any way. Two-thirds of Basutoland is moun-

tainous. Only about 1,500 square miles out of a total of 11,700 are suitable for arable cultivation. The nature of the terrain and the incidence of rainfall cause very heavy soil erosion, and the remaining third of the territory—the foothills and lowlands—has to support two-thirds of the total population in very overcrowded conditions. The density is about 650 persons per square mile of land suitable for arable cultivation. There are no mineral resources whatever.
Traditional attitudes over such matters as land tenure have discouraged the development of industry. At the same time, while all these difficulties have been present, there has been the pressure on educational facilities, on roads and hospitals to bring them up to acceptable standards, and to provide Basutoland with a Civil Service which can run the country when ex patriate officers leave. The territory is surrounded by South Africa. It is indeed a fact that in the overcrowded conditions of Basutoland a place is found in South Africa for large numbers of Basutoland workers. Its main products—wool, mohair and maize—are marketed in the Republic. If the Ox-Bow scheme comes to fruition its success will depend upon the amount of water and power which Basutoland could sell to the Republic. These are things that spring from its geographical situation, and whatever else we may do for Basutoland we cannot alter the facts of geography.
The Basutoland political leaders are perfectly well aware of these facts and are aware of the policies of the Republic. Hon. Members will find that in the 1964 Constitutional Conference Report the Basutoland delegation recognised the need to live at peace with their neighbours in South Africa and expressed their confidence that South Africa would likewise wish to live at peace with the people of Basutoland. More recently, the Prime Minister of Basutoland, at the conference last month, emphasised that no matter what Government are in power in Basutoland they must necessarily coexist with the Republic.
The Prime Minister refuted the suggestions that he would sell Basutoland down the river to the Republic. He said:
The fears had been expressed that my Government will barter away our land and our freedom in some disreputable deal with the Republic of South Africa. These charges are unfounded and unworthy.


Of course, no one can guarantee that any newly independent country will have an easy passage. The problem of guaranteeing Basutoland against aggression from without is sufficiently evident by a glance at the map, and in the 1964 discussions the Basutoland delegation made it clear that they were not seeking from this country an assurance of continued military protection after independence. At the same time, Basutoland will apply for membership of the Commonwealth and of the United Nations.
The Basutos will thus enter independence with a full knowledge of their situation, and without any illusions whatsoever as to their position vis-à-vis South Africa. I mention these things not because I think that they—any more than anyone else—can, therefore, feel lulled into a sense of comfortable security. In this harsh world no country is an island secure to itself. Each must look carefully to its relations with other countries.
I mention this because I do not think that the insecurities of Basutoland's situation provide a justification, in the face of all the insistent demands both from within and without Basutoland, for denying them something which they dearly wish, namely, their independence, and which they are themselves prepared to take on in full confidence of being able to sustain it.
I wonder sometimes, when I read the criticisms that have been made, whether the rabid radicals who make them are saying that because Basutoland is surrounded by South Africa, and South Africa practises apartheid, therefore we must never give any kind of independence Constitution to Basutoland, but force it to be a Colony for the rest of time. That, surely, is the logic of the criticism I have read.
Before passing to the Clauses of the Bill I should like to add a word on the matter of aid in a rather wider context. I think that all would insist on the need for higher aid and investment by the developed world in the under-developed world. It is estimated that the need is for half as much aid again as is being given now. We may well ask where it is to come from.
The efforts of some of the developed countries are already bedevilled by balance of payments problems—and I hardly

need mention that to the House tonight. A similar difficulty affects the United States, France, Britain, West Germany and Japan. They have all had balance of payments difficulties from time to time and no doubt will have them again hut, with the exception of France and Portugal, which is a special case, none of the developed countries is providing economic assistance amounting even to the 1 per cent, of the national income which it was hoped would be the figure reached in the "decade of development", as it was called, which the 1960s were planned to be. It was planned that this would be the allocation of most of the developed countries.

Sir G. Nabarro: Nonsense.

Mr. Lee: If the hon. Gentleman makes himself more acquainted with the facts, instead of revealing his crass ignorance, he will do much better.

Sir G. Nabarro: Will the right hon. Gentleman give way?

Mr. Lee: No, I will not.

Sir G. Nabarro: I will answer the right hon. Gentleman.

Mr. Lee: The hon. Gentleman can answer for as long as he likes.
At the beginning of the 1960s there was a feeling that, if we were to get advancement in the under-developed countries, at least 1 per cent. of the gross national product would be necessary from the developed countries for this purpose. The United Nations asked for that figure. The point is that the four or five big nations, ourselves included, are now expected to carry the whole of the burden of finding aid for the under-developed parts of the world. I am pointing out that, because of balance of payments difficulties in many of these nations, it is not possible for them to maintain that level and that, although aid as a figure may be slightly higher each year, as a percentage of gross national product it is falling in every nation.
I do not want to overdo this matter. But it is part of what I want to say about Basutoland within the wider context to those who believe that, in a period when the developed world is coming to a stage of new scientific revolution, when it can produce wealth far


more rapidly and readily than ever before, we can provide means of improving the aid given to under-developed parts of the world. It may well be that the poverty gap between the developed and the under-developed countries is the greatest single problem facing us, either in war or in peace. It is a very serious issue and many developed countries which are doing practically nothing in this respect should be asked to play a part in contributing towards solving this terribly difficult problem.
I do not know whether right hon. and hon. Members wish me to go through the Clauses of the Bill. They are common to this kind of legislation. The House is used to them. I hope, after what I have said, that the House will give the Bill a Second Reading and will send our good wishes and hopes for the future to Basutoland, together with our assurance that we will do everything possible to assist its people. In that spirit, I ask the House for a Second Reading of the Bill.

10.28 p.m.

Mr. Richard Wood: I have recently made my views very clear on the important question of aid—it was on the Second Reading of the Overseas Aid Bill—and I find myself in close accord with what the Secretary of State has said about it. On the particular aspects of the needs of Basutoland for aid, no doubt my hon. Friend the Member for Haltemprice (Mr. Wall), if he catches your eye, Mr. Speaker, will hope to say a few words.
We have seen in the world during the last two decades a massive movement towards national independence. Some of these changes have been won as a result of bitter and bloody struggles. More recently, we have seen power transferred to the new nations peacefully, willingly and without bloodshed. Unhappily, strife and bloodshed have all too frequently followed the transfer of power and a great many things are happening in Africa and elsewhere which cause pain and distress to sincere friends of the new nations.
Some are ready to criticise and say that because of this turmoil, this transfer was premature. I doubt whether it is right for us to be smug about recent upheavals. If we cast our thoughts back

things like toleration, the rule of law, respect for property and democratic government are all plants of fairly slow growth in Britain and the gap between tolerance and intolerance is still dangerously thin, even today. Much more disturbing is the effect of recent events, especially in Africa, on thought in other parts of the Continent. Uppermost in my mind is not Rhodesia, but the country that we are discussing now, Basutoland, which is to become the independent kingdom of Lesotho in 10 weeks' time.
In the past, we have found it disturbing when certain territories demanded independence. It is even more disturbing, in a sense, when the offer of freedom to run their own affairs is resisted by such a party as the Basutoland Congress Party, except on terms which the right hon. Gentleman, quite rightly in my view, has resisted. Earlier in his speech the right hon. Gentleman referred to the undertaking given by my right hon. Friend the Member for Streatham (Mr. Sandys) at the Constitutional Conference in 1964. He pointed out that this undertaking had been faithfully carried out, elections had been held and resolutions passed in both Houses of the Basutoland Parliament.
There is no doubt that the majority in the Upper House, the Senate, was highly respectable. In the Lower House, the National Assembly, there was a majority of 32 to 28. If my mathematics are correct, this would represent a vote in this House of 336 to 294—a majority of 42, which the last Government would have considered extremely respectable. After his Government had prevailed in the last Parliament by majorities of a fraction of 1 per cent. on a number of occasions, the right hon. Gentleman, very properly, does not feel that he can snap his fingers at a majority of 7·3 per cent. Therefore, the plea for further elections cannot lie strongly in the mouths of parties, all of whom stood for independence during the elections last year, elections which were carried out in accordance with my right hon. Friend's undertaking and which produced a substantial majority in the vote for independence.
It was a great pleasure for me, during their recent visit to London, to meet not only Chief Jonathan and the leaders of the other parties, but also the Paramount Chief. As others have found, I found


him a man of much charm and considerable intelligence. It is not for me to meddle in the economic politics of Basutoland, still less in those of Lesotho, but, like the right hon. Gentleman, I have been considerably disquieted by the alliance of this constitutional monarch with a political party.
A monarch, as we all have reason to know, can be the greatest force towards the unity of a nation, and the first need of Lesotho in the months and years after next October will be unity. Unhappily, a monarch can also be divisive and, having divided his nation, as history shows, a monarch may find himself destroyed by the forces that he has helped to create. All of us who hope for the future of this nation pray that unity and not disunity will be the aim of the Paramount Chief and I would like, sincerely, to emphasise and signify agreement with what the right hon. Gentleman has said on this occasion.
When my right hon. Friend the Member for Streatham gave the undertaking at the end of the Constitutional Conference in 1964, he coupled it with the assumption that when the time came
conditions in Basutoland would be such as to enable power to be transferred in peace and order.
This must be a matter of judgment. The move from dependence to independence almost always involves risks, and the question that we have to answer is whether these are outweighed by the dangers of further delay. My view is that such a delay, when all my right hon. Friend's requirements have been fully complied with, would merely add to the uncertainty and would be most unlikely to improve political stability.
When I met him—indeed, when I met all the leaders—I formed the clear impression in talks with Chief Jonathan and the other leaders in Basutoland that they were under no illusions about the problems that will face Lesotho after independence: its unique geographical position—I suppose that all geographical positions are unique, but some are more unique than others; the scarcity of natural resources, and the population density, which the Secretary of State mentioned, in such marked contrast to that in another country whose affairs we shall be discussing later tonight. Yet in all my conversations I found no

pessimism for the future, given—and this is a large condition—the benefit of national unity.
I believe that the Minister is right to go forward in the granting of independence. As he also said, he has had the support of the United Nations Committee of 24, who thought, quite clearly, that independence for the Protectorate should not be delayed. Disunity will bring no benefits to Lesotho. Its problems can best—indeed, can only—be tackled successfully by a united people. In hoping that the Bill will receive a unanimous Second Reading, I trust that all in Lesotho will unitedly seize the opportunity that will be theirs in 10 weeks' time.

10.38 p.m.

Mr. Alexander W. Lyon: My right hon. Friend the Colonial Secretary ended his speech on the rather wider note of the relationships, attitudes and problems of the developing nations to the developed nations. I am glad that he did, because it is at that point that I come into the debate. If this debate had taken place three weeks ago, I would probably not have had the temerity to address the House. During those three weeks, I have been at a conference of the World Council of Churches, in Geneva, where we had a representative collection not only of ministerial colleagues, but of lay colleagues, from every country in the world except China and Vietnam.
What struck me forcibly at that conference was the split, which is now palpably clear between the North and the South, in the developing nations at the frustration, the dejection and the despair of not having what the rich nations are constantly accumulating. As my right hon. Friend the Colonial Secretary said, the gap is getting bigger.
To the developing nations, only one answer seems possible and that is why, in a Christian conference where people from all denominations knelt together in prayer, the talk in the groups and in the plenary sessions was all of violence. Indeed, there was a movement towards creating theological violence. That is the attitude of the people who have not. It is for them that I make this plea.
I listened to my right hon. Friend giving us his well-intentioned proposals and his bland assurances. I heard the


cries of "Hear, hear" coming from hon. Gentlemen opposite, and I noticed how well fed they looked. That is not the attitude of the developing nations and, in particular, it is not the attitude of the Africans. We must remember that what is in issue in our attitude towards Southern Africa is not the short-term prospects of this country and not even the short-term prospects of any hon. Member of this House of achieving some position to which he may aspire. This is the whole future of Africa, and that means the whole future of the world, because, if the lid blows off in Southern Africa, it will involve us all.
What we are considering today is not the short term effects upon our balance of payments, which will be ephemeral, anyway. It is what will happen to our children in 10 or 20 years if they have to take part in blood-shedding which we have engineered by any of our actions. It is against that background that the Bill ought to be seen. Will it really be a contribution to peace and stability in Southern Africa? I concede willingly that none of us can say with certainty what is the true answer. All that I can say is that I am filled with foreboding and reservations.
About the situation in Basutoland there is all the atmosphere of a sell-out to South Africa, whatever is said. The Government there were elected on a minority vote. It will be the first Government who have gone into independence from British rule with a minority vote. It is interesting to note that the Constitution which we are giving to the country —and it is first rate in its conception—cannot be changed unless a majority in a referendum say that it should be changed. Yet here we are giving a country independence where the Government have only a minority of the popular vote.
I agree that it may be that the minority parties are self-interested in asking for new elections, but the plain truth of the matter is that there is, at the moment at any rate, a deep split between the Government and the minority parties. It is a poor vehicle on which to launch the country into independence, when one recollects all the difficulties of the situation there which have been so graphically outlined by the Colonial

Secretary. The people of Basutoland are surrounded by South Africa. Inevitably, they must be economically and socially subservient to the Union.
It is at this point that I make my plea, because they cannot hope for anything else unless we are prepared to guarantee their survival as a viable economic unit and as a viable state. So far, whatever the Colonial Secretary says, we have not done that. We have not given any more than an assurance that we will see that the grant-in-aid continues for the present, at any rate. This is a country with a £4 million budget, and it needs £24 million grant-in-aid from Britain to balance its budget. Against the background of South Africa, how can it hope to survive without her assistance?
It has been said that the Government there came into power because they received financial assistance from the Union. However true that may be—and there seems to be some evidence of it—it is certain that the party which came into power has links with the Union.

Sir G. Nabarro: When the hon. Member refers to "the Union", does he mean the Republic of South Africa? I support his argument entirely, but there is no longer a Union of South Africa.

Mr. Lyon: Yes, the Republic of South Africa.
It is against that background that one must consider the present situation. I grant that all the intentions are good, but good intentions have often paved the way to hell. That might be what will happen here. The intentions are good, because we have always said that we would launch the colonial territories into independence as soon as they were ready for it. We have always said that wherever it is possible countries should try to link themselves in association with their neighbours to make viable economic units.
But this is a totally different situation. Here is the Republic of South Africa committed to a policy of apartheid, and here is a small nation of 900,000 people which cannot, in present circumstances, be a viable economic unit, and must, therefore, ultimately become only a subsidiary Bantustan of South Africa. We must, if we can, try to avoid that.
I remember that 10 years ago Father Huddleston came back from South Africa


with his story of what was going on inside the Republic. I remember the questions that were asked at meeting after meeting, "What can we do to help the people of South Africa? ", and the answer was, "Precious little". We might have been a ale to do something back in 1908, but who had the farsightedness to see it then? We might have been able to do something before the Republic became completely subservient to apartheid, but no one was farsighted enough. Can we say that that is the position today? Have we not been warned?
It is true that this Bill may have got so far now that we cannot draw back, that it would be wrong to deny Basutoland its independence, but what we can do is to give them the assurance of financial aid. It is this assurance that I want the Colonial Secretary to give us tonight before we give the Bill its Second reading.

10.47 p.m.

Sir Gerald Nabarro: I have not been confronted by the right hon. Gentleman the Colonial Secretary in this House since he sat on the Opposition Front Bench and talked on fuel and power matters. We were then locked in controversy on every aspect of domestic matters, and this evening I shall no doubt be locked in controversy with him again, because I do not give an undiluted welcome to the Bill, for a variety of reasons which I shall hope to expound to the House.
I infinitely preferred the speech of the hon. Member for York (Mr. Alexander W. Lyon), which was completely realistic, to the pious aspirations of the right hon. Gentleman, who neglected to observe every practical, every economic, every financial aspect of this very difficult problem of Basutoland.
I sat observing the manners and particularly listening to the speeches in the Basutoland Parliament in Maseru a few months ago. I was the first British Member of Parliament to go to Maseru since Mr. Harold Macmillan called there on his way back from Cape Town after delivering his "wind of change" speech.
I claim no special knowledge of Basutoland, any more than any other African territory, but I am fully appraised of all the financial and economic aspects, and the possible implications, in a politi-

cal sense, in the future. I do not quarrel with what the right hon. Gentleman said about constitutional advance. It has always been my desire, in 21 years in public and political life in this country, to bring all our Commonwealth territories to self-government and to ultimate independence. I have always believed that economic self-sufficiency—I dislike the word "viability"—if not at the moment of independence, at least within the foreseeable future, is an essential ingredient of the granting of independence.
I shall not canvass all the constitutional history of Basutoland, which has been debated so fully in another place. I have read every word uttered there on this topic. I have listened to the symposium from the right hon. Gentleman this evening. I ejaculated, somewhat rudely—and I apologise to the right hon. Gentleman for my feelings getting the better of me for a moment—" Nonsense! "when he compared Basutoland with a Portuguese colony.

Mr. Patrick Wall: My hon. Friend is technically wrong. The Portuguese have no colony.

Sir G. Nabarro: No. These territories are technically part of the mother country, but they are always referred to as Portuguese colonies. I refer to Angola, Mozambique and many other territories which are constitutionally part of mother Portugal but are always referred to as Portuguese colonies.
But when the right hon. Gentleman sought to compare—or to make some sort of analogy between—Basutoland and the near-adjoining Portuguese territory of Angola, across a strip of South Africa, he was talking the most utter nonsense. There is no analogy whatsoever between the two.
I am prepared to continue the assurances given by my right hon. Friend the Member for Streatham (Mr. Sandys) when he was Secretary of State for Commonwealth Affairs. I think that I should read this evening the statement he made following the Constitutional Conference held in London in April and May, 1964, under his chairmanship. He said that he
Undertook that if, at any time not earlier than one year after the new elections, the people of Basutoland, by resolutions of both Houses of the Basutoland Parliament (or in the event of disagreement between them, by a


majority of those voting at a referendum) should ask for independence, the British Government would seek to give effect to their wishes as soon as possible. He made it clear that this undertaking was given on the assumption that, when the time came, conditions in Basutoland would be such as to enable power to be transferred in peace and order.
Just about peace and order has been achieved ; not much more. There is a minority Government—as the hon. Member for York said. In many parts of Basutoland the people are utterly primitive almost as primitive as in the Southern Sudan, where they vote by signs. I doubt whether they were able to assess the constitutional niceties of the decisions being put before them, or whether the present constitutional proposals are tenable for any length of time, especially having regard to the attitude of Chief Jonathan.
I have quoted somewhat earlier information obtained from the Constitutional Conference held in London; let me say something of much more recent events. On 8th June of this year, when the Basutoland Independence Conference was opened in London—and the right hon. Gentleman omitted to refer to this—copies of the opening speeches by Chief Jonathan, Mr. Mokhehle and Mr. Edwin Leanya, of the Marematloue Freedom Party, were made available. It was clear that both opposition parties were strongly opposed to independence at present, on the ground that the necessary peace and order referred to in the report of the May, 1964, Constitutional Conference in London did not exist today in Basutoland. Mr. Mokhehle also argued that by giving independence to Chief Jonathan, Basutoland would virtually be handed over to South Africa.
That was the point inferred by the hon. Member for York. These two opposition parties between them command a majority of votes, in spite—I use this term metaphorically and not literally—of the rather crude form of general election held in Basutoland. Therefore, I doubt whether the pious aspirations of stable Government and early national unity in Basutoland uttered by the two Front Bench spokesmen are practical realities or possibilities. I have grave apprehensions about these matters.
I now leave constitutional matters and turn to what I believe to be much more

important—the economic situation. I shall give precise figures, as the right hon. Gentleman neglected to do. He hoodwinked the House by his omissions—[Laughter.] The right hon Gentleman should not giggle—

Mr. Lee: I was not giggling.

Sir G. Nabarro: Would the right hon. Gentleman prefer not to be sedentary, but to intervene? I am willing to give way. [Interruption.] The rudeness of the right hon. Gentleman is unsurpassed. [Interruption.] Is it in order for the right hon. Gentleman to refer to you, Mr. Deputy Speaker? I must ask protection against the right hon. Gentleman. Broad of beam and sedentary he is.
I will give the facts and figures which he omitted. Basutoland has a population of 733,000. The last available figure shows a revenue of £2½ million and the last available figure for expenditure is £4 million. There is a deficit on current account at the rate of £1½ million a year. If independence is to succeed, this deficit has to be underwritten for the foreseeable future so as to ensure stable government. I wonder whether any hon. Member would contradict that axiom. There cannot be stable government in an independent, emergent African territory unless there is economic self-sufficiency.
In the absence of that self-sufficiency, and for a limited period, the deficit must be underwritten. Why did not the right hon. Gentleman say this evening, in clear and unmistakeable terms, that the British taxpayer will meet the deficit for all foreseeable future?

Mr. David Steel: Hear, hear.

Sir G. Nabarro: I am glad to have the support of the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel).
Why did not the right hon. Gentleman say, in clear and unmistakable terms, "We propose that the taxpayer shall subsidise the people of Basutoland by a minimum sum of £13 million a year for all foreseeable time in future. Probably, the deficit will grow."? That would have been truthful, implicit and easily capable of understanding. I should not have quarrelled with him if he had said so. I merely dislike subterfuge on the part of Ministers. [Interruption.] I am sorry


that the right hon. Gentleman is giggling again. He giggles overmuch on these serious matters.
If we do not do it, who will do it? Not the United Nations—oh, no. But South Africa—oh, yes.
Let me go back to first principles. To be certain that I have not mistaken any single fact, I sent to the Library of the House for these two large volumes-to make perfectly sure that I had the geographical situation of Basutoland correctly. I have not approached Basutoland by every road into the territory, but I have travelled on the road from Pretoria to Maseru. That is the customary road to travel when approaching Basutoland, but there are other routes. Basutoland is totally surrounded by South Africa and in the event of South Africa being hostile to Basutoland the only entry into Basutoland would be by air. Now that South Africa has established, before the International Court at The Hague, its suzerainty in respect of South-West Africa—

Mr. Alexander M. Lyon: Before the hon. Gentleman proceeds, will he accept a minor correction? That is not exactly what was decided at the International Court. I agree that this is the impression which is going about in Africa, but I hope that the hon. Gentleman will not add to that impression. All that was decided at The Hague was that the proper authorities had not brought this case before the International Court. I wish that Her Majesty's Government would ask the United Nations to do that.

Sir G. Nabarro: If the hon. Gentleman will forgive me, and subject to my catching Mr. Speaker's eye later tonight or early tomorrow morning, I will endeavour to contribute to the Second Reading of the Botswana Independence Bill, which impinges much more directly on the South-West Africa problem than does this Bill.
I was saying that South Africa has, in my view, strengthened its position by what appears to be the outcome of the International Court's ruling at The Hague. Basutoland is surrounded by South Africa and is utterly lacking in self-sufficiency, economically and financially. I believe that the British handing over power in Basutoland will lead to the as-

sumption of suzerainty over Basutoland by the Republic of South Africa within a few years. Indeed, I believe that if we could end apartheid, and if there were genuinely satisfactory racial relations in South Africa, then, on geographical, economic and financial grounds, the correct home for Basutoland would be within the Republic of South Africa.
I recall that when I sat on the benches opposite, when Mr. Fenner Brockway was the hon. Member for Eton and Slough and sat on these benches and when the Under-Secretary of State for the Colonies, the hon. Member for Wednesbury (Mr. Stonehouse) also sat on these benches, no one was so inflamatory in speeches in the House and no one attacked Tory Ministers more viciously than they did when they thought that there was the least suspicion of Her Majesty's Government relinquishing their protectorate powers in respect of Basutoland and when they feared that the Protectorate might fall within the suzerainty of the Republic of South Africa.
But here tonight, with the Under-Secretary of State for the Colonies in his place on the Government Front Bench, the Government are doing what he and his hon. Friends roundly condemned when they were in opposition. I repeat that I do not give an undiluted welcome to the Bill. I am fearful and apprehensive about the future of this territory if immediate independence is granted. I would much prefer it to continue as a British Protectorate, but with internal powers of self-government on domestic matters alone for at least another five years, certainly until better progress can be made economically.
The right hon. Gentleman the Secretary of State, in a way characteristic of the subterfuge throughout his speech, talked about developing water power in Basutoland. Yes, of course—like developing the Snowy River hydro-electric scheme. Tens of millions of pounds of investment wanted; a 15-year project in the north-west of Basutoland to provide the water power. I know that it is some time in the future, but who will provide the money? Not Britain. Britain is living today on borrowed money. Why should we borrow money from bankers in Zurich and Frankfurt and elsewhere to give it to Basutoland? Are we morally or financially justified in doing so? I


doubt it. But then, the right hon. Gentleman's strong point was never a balance sheet.
I find much that is offensive in the Bill. I shall not vote against it, unless I can find colleagues—from both sides of the House—to vote against it with me. If I could find another Teller to go with me, I would vote against it, because I think that it is misguided and premature.
I fear that within three years of my apprehensions being voiced this evening, they and the apprehensions of the hon. Member for York, will prove to have been well-founded. The hon. Member's speech was not as violent as mine, for he is a gentle character in every sense of the word, but his apprehensions were similar. Therefore, if he would like to tell with me, as a demonstration of our apprehensions, I shall instruct him how to do it. I have never been a Whip, but I have voted against my party so many times that I know how to line up as a Teller and do the job. If the hon. Member likes to tell with me, I shall register in the Division Lobby my apprehensions concerning this territory.
I hope to catch your eye again later, Mr. Deputy Speaker, to return to the same principles in relation to Botswana, where I hold those principles to be correct even more strongly than I have been able to voice them in the context of this Bill.

11.8 p.m.

Mr. J. J. Mendelson: I do not want to be too harsh on my right hon. Friend the Colonial Secretary when I say that I was amazed at the certainty with which he spoke this evening and the severity with which he criticised what he called radical critics who had raised some doubts on the present political situation in Basutoland. I do not want to be too harsh on him, because I know that he is carrying out a Cabinet decision which was arrived at before he came to his present office.
But as my right hon. Friend has arrived there so recently I am all the more surprised at the certainty with which he spoke. I am equally surprised that the right hon. Member for Bridlington (Mr. Wood), who spoke from the Opposition Front Bench, for whom I have had a high regard for many years

should have joined with equal certainty in approving the kind of procedure that is now envisaged.
I wonder how much time the right hon. Gentleman has spent examining the situation in Basutoland, how he has derived his knowledge of the various views that the opposition parties are at present holding on future independence, whether he has compared those views with what they might have said in 1963, and whether he has investigated the reasons they might have had for changing their mind.
I should, first, like the House to consider the changed situation in recent years in Basutoland. For many years it has always been expected that at some stage Basutoland and the Republic of South Africa—it was hoped that it would be a liberal-minded Republic in favour of the equality of man—would be a haven for some of the Protectorates if they wanted to join in and take part in the economic development of the Republic on equal terms. But, ever since the establishment of the abhorrent regime which is now in power in the Republic, it was quite natural that many people would have to reconsider their original views and position.
Anyone who has been to Maseru, anybody who has discussed with members of our Administration there the details of the financial provision for which they have asked over the years and which they have been denied by successive Governments, will understand why economic progress has been so painfully slow in Basutoland. In past years, our administrators will say, when they discussed this problem the expectation of joining with the Republic was always one of the main stumbling blocks to their demands for better financial provision from this country. There was a reluctance on the part of successive Governments to provide the necessary money for development because they did not think that it was necessary on account of the expectation of a different kind of longterm political future for Basutoland. The result of this long-term neglect has been that some of the economic potentialities of the Protectorate have not been developed.
When I was there in 1963, a number of people were talking in terms of independence. But my right hon. Friend is


taking the case far too easily when he says that the principle of independence is overriding and that, compared with it, no ether consideration can be of real importance. That is far too easy a position to state and to defend, as he well knows. Of course, it is true that the present President and leader of the main opposition party would have said in 1963 that he was in favour of independence at an early date. Which national movement in any African or Asian country did not take that position? But a lot has happened since then.
In 1963, I discussed with the present leader of the opposition party and others the potential dangers which might develop if independence were rushed. I was not known as a Member of this House who was opposed to independence movements in various African countries. I was known as a Member who, with many others, including Fenner Brockway, now Lord Brockway, and hon. Friends now in the Cabinet and on the Front Bench, supported the claims to advancement and independence of many African countries. But one cannot be blind to the fact that there are other factors now which provide an adequate basis for reconsideration.
The right hon. Gentleman the Member for Bridlington should not make life so easy for himself. From his knowledge of what is going on in that part of the world, he ought to have some understanding of the position of the leader of the main opposition party in changing his mind. A man who never changes his mind is acting irresponsibly if he is in a position of responsible leadership.
As I see the situation, there are two main dangers, and the Government ought to give an adequate answer about them before we support the Bill tonight. The first danger arises from the political tie-up which already exists between the present Prime Minister and his party and elements in the Republic of South Africa. While it could probably be proved that other parties in the last elections received support from abroad, and while this is one of the dangerous elements in the situation which we must not overlook, it is true, and not denied, that the present Government received financial assistance from the Republic of South Africa during the last general election.
This means that there are already certain potentialities in the future political development of Basutoland which might give too much dangerous influence in Basutoland to the Government of the Republic. In this situation, it is quite right for a large number of people in important political positions in Basutoland to feel great apprehension about the future.
It has been said by my right hon. Friend and others that the present position has been arrived at as a result of undertakings given by the previous Government and that the present Government and my right hon. Friend are only carrying out a policy which had been enunciated by the previous Secretary of State. This is no good reason at all for not looking at the situation again in the different position of today. There is no automatic carrying over of Cabinet decisions and enunciations of previous Secretaries of State into present policies and present positions.
I have supported the Government on previous occasions when they have refused to carry out a policy enunciated by a previous Secretary of State and in this case the policy would not be a useful one at the present time in the changed circumstances. I hope, therefore, that the Government will give an undertaking that they will watch the political situation in Basutoland after independence and that they will see to it that we retain a continuing interest in the military security and independence of the former Protectorate.
It is too late to carry forward the argument about the Bill itself. I do not believe that at present there is any hope or chance of the Government changing their mind and holding another general election before the Bill becomes law. I therefore concentrate on what I believe to be practical politics and demand from the Government an assurance that they will retain for the United Kingdom a security interest in the independence of the people of Basutoland.
If it be argued that this may be difficult to accomplish, I would suggest that for a number of years to come we will be in a special position, even after independence, in our relations with Basutoland. We have always accepted that we are in a special position in relation to


the Federation of Malaysia. This is common ground between both sides of the House. Therefore, what I am suggesting, and asking assurance on from the Government, is not new or revolutionary.

Sir G. Nabarro: If the hon. Member does not get the assurances from the Government tonight—and he is asking for them in almost identical terms to those which I used—what does he propose to do? Does he propose to oppose the Second Reading of the Bill?

Mr. Mendelson: I said that I think it far too late to demand another general election or reconsideration of the procedure which is being advanced. I do not believe that that is practical politics at this stage. What is practical politics is to seek to persuade the Government to give the assurances which I am demanding.
I move to another consideration which concerns the people of the Republic itself. Anyone who has been to the border areas of the Republic will know of the problem of political refugees. This is a serious problem. On this, I am certain that I can enlist the sympathy and support of the two Front Bench spokesmen. Anyone who has been to the border area will know that the situation concerning the police is far from satisfactory.
The special branch of the South African police have a habit of ignoring the frontiers of the Protectorates so that a number of people in any one of the Protectorates have a sense of uncertainty about their safety and security. There have been cases where these people have been abducted or illegally arrested. When I was in the Republic our embassy honourably intervened on behalf of a citizen of the Republic who had been illegally arrested. This is a problem which is very serious.
I therefore ask my right hon. Friend to give us, also, an assurance that the rights of refugees from the Republic to go about their peaceful business—and very careful limits are put on their activities in the Protectorate at present—will not be done away with in future. I invite my right hon. Friend to tell the House before we pass the Bill what assurances he has received from the Prime Minister of Basutoland, before

independence, on the continuation of a liberal policy to be applied to these refugees.
A further problem is involved here. Quite clearly, the chance of building up the Protectorates to their full economic potential has been missed, but we ought to see to it that they are given the best possible opportunities to work their independent position against the background of the economic possibilities within their own territories. We shall later be considering a Bill having to do with another territory where the economic potential is greater, but where the danger of interference is also present. In this case, would my right hon. Friend tell the House, before we pass this Bill, what plans the Government have for giving future economic assistance that would help in building the political independence of Basutoland after that country has become an independent State?
Basutoland will be a member of the United Nations. Quite clearly, one of the possible answers to my request will be that it will then be up to the United Nations to provide the ordinary security that it has to provide for all other countries. That is the ideal state we all hope to reach—we all look forward to a situation in which the United Nations takes effective charge of all these problems—but we know very well that Her Majesty's Government are supporting, and participating in, a number of policies —as, for instance, in the case of the Federation of Malaysia—where the United Nations is not yet in a position to do the job itself. It is, therefore, essential that before we pass the Bill the House should be told what this country is prepared to do in these respects.
I do not want to delay the House any longer. Quite a number of hon. Members who are here, and others, share my view on this matter. This has nothing to do with the position of the Paramount Chief, and it should not be confused with his particular interests. The Paramount Chief has his own point of view on the constitutional position. I met him when I was out there, and I had a long interview with him again when he was in London. It is for the Government—and this is a matter of judgment—to assess whether his particular demands are justified at the present time. But the fact that he may also have been moved in his


attitude, to some extent, at any rate, by fears for the future independence of his country, should not be immediately dismissed as a possibility.
I do not want to say anything that might exacerbate the position in Basutoland, or anything that might make agreement among the political groups out there more difficult, but I urge that if the Paramount Chief is partly guided by his apprehensions of encroachment from the Republic: hat part of his argument should be given serious consideration. I hope that later we shall receive answers to these questions.

11.25 p.m.

Mr. Richard Hornby: 1 have listened with much interest to the speeches made from both sides of the House. One needs to weigh one's words carefully when the lion of Kidderminster lies down with the lamb of York.

Sir G. Nabarro: My hon. Friend has made a bad blunder—Worcestershire, South, please.

Mr. Hornby: Worcestershire, South, my memory goes back.
It is certainly true, as has become obvious from the speeches which have been made, that the House does not give an easy and undiluted welcome to the Bill. There are anxieties which have been expressed in all the speeches to which I have listened, anxieties which were also expressed to me personally and to other hon. Members during the recent constitutional conference by members of the opposition parties and by the paramount chief. Nevertheless, the question before the House this evening is: do we wish to delay the Bill and do we think that by doing so we can improve what is not an ideal or perfect situation, as few situations at the difficult point of take-off in any of these developing countries are perfect?
Secondly, are o there any additional commitments that we wish the Government to undertake at a time when they are proposing to grant the request for independence? One needs to emphasise that we are answering a request for independence, which was stated in the conference of 1964. Since then, although certain conditions may have changed, it is still true to say that a different Government have noted that the conditions

demanded during the 1964 conference have been met, namely, a majority in both Houses in Basutoland. One comes back to the question: is one likely, with all the doubts that have been expressed, to be helping the delicate situation there by delaying this Bill tonight?
Three main questions have been raised. One is the question of national unity. Secondly, there is the question of poverty and financial dependence, and, thirdly, the larger question of propinquity with South Africa. Those are three questions to which we must pay some attention. I do not believe that the cause of national unity would be served by delay at this point of time. Certainly, that national unity is not perfect nor complete for reasons which have been expressed. Still less would it be perfect or complete if now the British Government were to turn back in their tracks and say, "Despite the request made by all parties in 1964, we cannot now grant the independence which has been asked for." The dangers which would then ensue of a divided nation would be greater, not less, than the difficulties which are present now.
On the question of financial dependence and poverty, granted that this is so to a fairly acute degree in the country, surely we have by now accepted the principle of obligations on developing countries continuing after the stage of protectorate or colonial status. Surely this is something which we have to continue to accept. My hon. Friend questioned—and it is a fair and proper question—whether it is morally right that Britain at a time of strained finances should ask her own people to devote any resources to the people of Basutoland after independence. My answer, and I hope that he will agree, is that it would be wrong for Britain to seek to solve her own financial problems by contracting out of obligations which all the developed nations have accepted, and must continue to accept if we are not to see a deteriorating situation, particularly in places such as Southern Africa, where the under-developed nations come dangerously in contact with one another.
Then we come to the question of the propinquity of South Africa. For all my disquiet about and dislike of many aspects of South African policy—and I hope that


the House will not think I am inclined to be unduly favourable towards it—I do not think that it is a part of the South African Government's policy to wish to extend South Africa's frontiers, which would involve an extension of the imbalance between black and white in the area.

Sir G. Nabarro: That might be a statement of good intentions—I do not dispute that. But in view of the repressive policies of the kind practised in South Africa today, has it not occurred to my hon. Friend that there would be a substantial number of refugees perhaps seeking asylum in Basutoland and that that would be a continuous cause of friction which might ultimately lead to the absorption of Basutoland? This is a highly political matter and my hon. Friend should not neglect that possibility.

Mr. Hornby: I do not neglect the political dangers. I think, however, that one should also admit that there are dangers of infiltration into Basutoland whichever decision we take. If we were to hold back on the present position, I believe that it would be a signal for considerable infiltration of another kind which equally might produce precisely the same dangers of which my hon. Friend and I are aware.
While we recognise the lack of national unity at present, the financial needs of the area, the dangers of infiltration and unrest, it is better that the Bill should go forward. As I emphasised, I believe that we should in this case, as in others, continue to do our best to play a major financial part in developing the resources of this area.
Finally, and perhaps regrettably—and I would like to explain my reasons—I do not think that, at the point of independence, when the full issues of independence have been raised, it is necessarily right for Britain to give complete defensive commitments regardless of all the consequences that that might entail. One puts the pros and cons of independence before it occurs; one listens to the requests for that independence and when, regardless of the isolation that may occur, those requests are proceeded with, and recognising that circumstances may occur in which Britain certainly might want to

play a part, I do not believe that there is an obligation on one sovereign State to enter into a total and final commitment with another State which has elected at that moment for sovereignty.

11.30 p.m.

Mr. David Steel: The Secretary of State will recollect that, when the independence talks in London were in progress recently, my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond), my hon. Friend the Member for Devon, North (Mr. Thorpe), Lord Rea and I came to see him because we were concerned about the way in which the talks seemed to be heading. I must say that, when we left him after listening to all the difficulties and explanations which he gave, we were left with the impression that we were all getting somewhat involved in some kind of irreversible progress, completely undesirable although irreversible.
It may be that the assurance of the right hon. Gentleman the Member for Streatham (Mr. Sandys) was too ineclectic in its scope. Perhaps the present Government thought it could not go back on an undertaking given by the previous Government and had no alternative but to proceed with this Bill; or that perhaps, we should have no alternative but to pass the Bill which is now before us.
In the face of all this, I think that we should express our regret that this state of affairs has brought us to this particular point. As an hon. Member representing the Liberal Party I can speak with some feeling about minorities and minority Governments. Throughout the political history of this country at least, we have usually had minority Government, but it is equally true that we have come through a very long period of development with a highly sophisticated political system.
We have now arrived at this state of affairs, but it is odd that, although in the case of Guyana a proportional system of representation should have been worked out, this desirable system was not available in the case of Basutoland. Had it been, and had the will of the people as shown in the recent elections been the same in percentage terms, then a coalition Government would today be holding power in Basutoland. They had only 42 per cent. of the votes, but with proportional representation they would have had


the number of seats represented by that percentage in Parliament. A strengthened coalition would have sought independence.
That would have been a very different situation, but, given that that was not to be, it is essential now that the three parties should try to achieve as close a unity as is possible. We in this country have had coalition and national Governments in the past, not always successfully, but they have always arisen in times of national emergency. What we have to realise is that what is facing the Basutos after independence is also a national emergency; it is nothing less. I have never criticised the "new" countries for having one-party government. In Kenya, there was a democratic Government and Opposition system to start with, but it ended with a union between K.A.N.U. and K.A.D.U., and ending up with a system like this in something of a national emergency is perhaps inevitable.
It is, perhaps, also not a bad thing, and in the present situation I hope that it may be possible for the Paramount Chief to devote some of his time to his constitutional position. I hope that Prime Minister, Chief Leabua Jonathan, may make some conciliatory gestures towards the opposition for some kind of political unity to be possible. Other-wise, I think that the future may not be particularly happy for the Basutos. I hope that it is something which can go out from this House tonight. One reason why I advocate what I have just said is that it is essential for us to have some firm assurance from the Government about maintaining the economy of the Basutos.
That people of Lesotho would be in a stronger position if they were to act in the united manner that I have suggested to obtain such assurances, backed by many hon. Members from both sides of the House. What we have to look at when we consider the figures given by the hon. Member for Worcestershire, South (Sir G. Nabarro) about the amount required to maintain this country's budget in the manner to which it has become accustomed in the past, without allowing for any expansion or serious capital investment, is the fact that it is a fairly small sum.
The impression has got abroad among those willing to criticise this country in instances such as this that what we are now seeing is some kind of conspiracy to get rid of a little-known, far-off territory with a small population which is possibly something of an embarrassment to us. I do not believe that this charge is correct; I do not believe that the previous Conservative Government were, and the present Labour Government are, involved in a deliberate conspiracy to rid themselves of an obligation. But I think that that charge could stick unless we make it clear that we are maintaining the moral obligations which we have towards Lesotho.
When we consider that the sum involved is about £2 million, and relate it to the present Budget, and when hon. Members on both sides seek firm assurances from the Government Front Bench, then we have to look at this in the context of the Government's total policies. I was a little disturbed at that section of the Prime Minister's recent statement referring to cuts in military and civil aid, as though this was one and the same thing, and so unspecified that he did not really know what it would mean. Without dealing with the merits of the policy, a Government who decide that they have a world role, that they can spend £200 million a year maintaining an east of Suez role, will find it very difficult to refuse £2 million, one-hundredth part of that amount, in retaining a responsibility towards a small country such as Basutoland.
It would be a disgrace if the House were simply to let the Bill go through without demanding these assurances. Tempted as I am to join the hon. Member for Worcestershire, South, it is too late to vote down the Bill—

Sir G. Nabarro: I did not suggest that I wished to vote down the Bill. What I was seeking, and so, I gather, are many of my colleagues on both sides of the House, was some means of extracting or extorting from the right hon. Gentleman an assurance that the deficit in this country's Budget will be met by the British Government over the next few years. Unless it is met is it possible to achieve unity in Basutoland?

Mr. Steel: I am entirely with the hon. Gentleman in this matter. What


I am saying is that I believe that the Front Bench must have been impressed by the arguments advanced from both sides of the House, and that it would be a disgrace if it were to go out that the House simply passed the Bill with a few kind words and good wishes and nothing more, and then went on to pass to another subject and another country.
I hope, in all seriousness, that the Government will give us the assurance that we are prepared to accept our responsibilities adequately in giving independence to Basutoland.

11.44 p.m.

Sir Douglas Glover: I must admit that I am here to speak on the next Bill that we are to consider, and that I did not intend to intervene in this debate. Having listened to the debate, and having intervened in a debate on the territories about 18 months ago, I must say that I am very worried about what we are doing tonight. I do not usually criticise, except in a muted way, the Front Benches of either side of the House, but I do criticise both Front Benches equally over this matter. This is not a party political matter; it is a matter of how to deal with our international obligations. About 18 months ago I said of the territories for which we were still responsible that those about which we must be most careful in granting independence were the territories which were surrounded by South Africa.
The Front Benches, on both sides—my hon. Friend the Member for Tonbridge (Mr. Hornby) was a Minister in the Conservative Government—try to dress this up as though it is a great liberation movement. Really, it is simply getting rid of our responsibilities. It is rather like a man releasing a sheep from a pen surrounded by wolves and saying that he has given the sheep its independence, well knowing that it will be torn to pieces within five minutes by the ravening wolves surrounding it.
Basutoland is surrounded by South Africa. South Africa's policy is entirely the opposite of that for which anybody in this House stands. What will happen when this country gets its independence? Independence, I ask the Secretary of State, for what and from what? Does the Minister have any assurances from

the South African Government? Does he have any built-in safeguards? I know that this is a continuing policy, and, therefore, I am not criticising simply the present Minister. I am just as much criticising my right hon. Friends. What will happen to this country when it gets its independence? Will the people in that country develop as free, independent citizens of a proud independent nation?
We in this House know, if we cut away the cant about independence and liberation, that Basutoland, having got its independence, will be put into satrapy with South Africa. Nearly every person in that country will depend upon South Africa for his living, his income, his future and even his freedom. We know it, but we are not prepared to say so bluntly on the Floor of the House. Whatever the elections in Basutoland may mean, the Bill means that we are handing over the future of that country so that it is much more likely to be dominated by the politics of South Africa without the protection of the United Kingdom as a counterweight to those policies.
If, therefore, there is to be any chance of a future for the country when it is independent, we in this House have a duty and a right—but the words I have used are far too inadequate—by our financial provisions to guarantee that when the country gets its independence, its prosperity will begin to grow and, therefore, its people will not be subservient to and will not be the satellites and the serfs of the South African community that surrounds it.
Have we taken any steps before we pass the Bill to get an assurance from the South African Government that there will not be interference in the affairs of this country? We know that political parties have a top strata. They have a lot of bemused voters who vote. The hon. Member for Penistone (Mr. Mendelson) is nodding, but the reason he is supporting his Government is that a lot of bemused voters stood for what he stood for.
That is how, in a developed country, democracy works. In Basutoland, however, the top strata is a far more important element in the country's affairs than it is here, because the bottom strata do not know the dangers and the problems and they vote according to how their chief or their guide tells them to


vote. Therefore, there is the problem that the political parties want independence. I very much doubt whether, if a referendum were taken from the mass of the people in Basutoland, they, knowing the dangers, would be as keen on independence.
Therefore, I agree with the hon. Member for Penistone that the pass has been sold. We are faced with a Bill granting the country independence. All that we can do is wish it well. However, I think that we have the right to demand from the right hon. Gentleman a clear indication of the financial support that the British Government will give to the country once the Bill becomes law. If necessary, and if the hon. Member for Penistone and my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) are willing to support me, I am prepared to divide the House.
If we do not give financial support we are selling into servitude a group of defenceless people who are surrounded by a nation which holds entirely opposite views. The only safeguard that we have is to make certain that the financial provisions are such that the country's prosperity can begin to grow.

11.50 p.m.

Mr. Patrick Wall: Speeches of all right hon. and hon. Gentlemen have referred to two leading persons in Basutoland. The first is the Prime Minister, Chief Leabua Jonathan, and the second is Constantine Bereng Seeiso, Moshoeshoe I, Motlotehi or Paramount Chief.
I know Basutoland fairly well and can claim a friendship extending over many years with both these men. As many right hon. and hon. Gentlemen have already said, I believe that the future of their country may well depend on their remaining together to work the Constitution which this House is about to pass.
I would like, first, to deal with the problems of the Prime Minister. My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) talked about a minority Government. As the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) pointed out, not only have there been a number of minority Governments in this country from the point of view of votes for many years, but the present Government are a

minority Government in terms of votes. So I do not think that we can really use that yardstick on this occasion.
Then there are those who say that because, since the general election last year, the Basutoland Congress Party and the Marematlou Freedom Party have made a coalition they together represent 45 per cent. of the votes as against the 41·6 per cent. of the National Party. Again, that is not a tenable suggestion, because all my information leads me to believe that the Marematlou Freedom Party only supports the Congress Party in its present stand that the Paramount Chief should have greater powers. I do not think that the two parties agree on any other issue and that, therefore, this coalition is one of political expediency on a very narrow point.
Again, it is notable that the leader of the Marematlou Freedom Party, Dr. Seth Makotoko, has failed to call an annual conference this year, perhaps because he realises that his stand in the coalition is not too popular with members of his party.
Then again, we have to consider the Senate. It is composed largely of chiefs, who are obviously the traditional supporters of the Paramount Chief. Only recently, 17 of those chiefs have come out against the Paramount Chief on the question of his powers. I understand that 17 out of 22 have written to the Secretary of State to say that they do not agree with the Paramount Chief about the powers that he demands should be transferred to him when the sovereignty for Basutoland passes from Her Majesty. That is actually the basis of the quarrel between the Prime Minister and the Paramount Chief.
Speaking again from personal experience, I believe that the Prime Minister, Chief Leabua Jonathan, wants good relations with the Paramount Chief. He himself comes from the royal family. He has already given examples of his willingness to work closely with the Paramount Chief, soon to be king, in agreeing against the advice of his own party to continue the Privy Council which the Paramount Chief wishes and has agreed to the entrenchment of land and the whole system of chieftainship in the Constitution, which again was against the advice of quite a large number of the Nationalist Party. Chief Leabua has demonstrated


by these acts that he wants to do his best to work with the Paramount Chief. I hope, therefore, that these two men will come together and decide to work in cooperation for the good of their country.
I have always felt, and have said so both publicly and privately, that the National Party and the Marematlou Freedom Party, the traditional party of the Paramount Chief, were far closer in aims than the Basutoland Congress Party. The Congress Party has traditionally been anti-chief. In fact, it opposed the granting of increased power to the Paramount Chief in the general election last year, and now I suggest that it is merely walking back and becoming an ally to the Paramount Chief for political expediency.
It is perhaps often thought that in Africa the party in power at the time of granting independence is likely to remain in power rather longer than it would under the old colonial system, and this, I think, is what dominates the minds of politicians in a country just approaching independence.
It is clear that not only at the 1964 Conference did the Congress Party demand and put its signature to a demand for independence, but that way back, in 1962, two years previously, when my hon. Friend the Member for Ormskirk (Sir D. Glover) and I were representing this country on two different Committees of the United Nations—

Sir D. Glover: And very ably, too.

Mr. Wall: —and I had to endure two days of speeches from the members of the Basuto Congress Party, who read all 61 pages of this document, they then stressed their demand for immediate independence for their country. It is perhaps of interest to note that one gentleman who presented these demands on that occasion, now a member of Parliament in Basutoland, was one of the two members who went to the United Nations Committee of 24 last month and got a rather dusty answer from that august Committee, which took the view that as they had been asking for independence they should have it. I hope, therefore, that my hon. Friends will not divide the House tonight. It would be most unfortunate if they did, because the interpreta-

tion placed on this in Basutoland could lead to violence.
On the other hand, hon. Members on both sides of the House have stressed certain defects in the Government's proposals, some of which I should like to take up. I hope, for example, that the stress laid on aid tonight will be listened to in Basutoland, and will be listened to by Her Majesty's Government.

Sir D. Glover: I have no intention of dividing the House, provided that the Minister gives a clear assurance to the House about aid.

Mr. Wall: That is a matter for the right hon. Gentleman, and I hope that he will give us a clearer assurance on aid than we have had so far.
We have heard a lot about the Paramount Chief and his demand or what appears to be his demand, for power, and, therefore, it is fair to examine briefly what he has asked for. I think that the House will see that in the circumstances of Africa today, though it is not possible to accede to them, they are not wholly unreasonable requests.
His view is that the Head of a State in a small independent African State today needs effective power. He points to the common form provisions which exist in monarchies in Europe such as those in Sweden. Norway, Belgium, and Greece. They do not exist in this country, because we do not have a written constitution. He maintains that in these European monarchies executive authority is vested in the king, and the king appoints and dismisses ministers, confers promotions in the armed forces, declares war, signs treaties, and so on.
He believes that in his capacity as Head of State he should succeed to the reserve executive and legal powers in external affairs and over internal, security, which today the right hon. Gentleman enjoys, on behalf of Her Majesty, under the present Constitution. He agrees that these powers should be transferred to the Prime Minister, but he thinks that the Head of State should have the right to step in and assume these powers if an emergency arises.
It is clear that there is some justification for these thoughts of the Paramount Chief. After all, he looks over to


Bechuanaland and sees that the traditional Paramount Chief is to become an executive president. He looks to Swaziland and finds that the Paramount Chief is not only king of the Swazis but the real leader of a political party which enjoys unanimous support. So he finds political power vested in his opposite numbers in those two other High Corn-mission Territories.
I do not think that we should feel that this young man is being too unreasonable. But history is against him. The development of political parties in Basutoland started virtually before he came on the scene as a young man, completing his education in England. The situation in Swaziland does not exist in Basutoland for many reasons with which I will not bother the House. If we pass this Bill we introduce a Constitution which makes the Paramount Chief a constitutional monarch. I wholly agree with the Secretary of State that in the circumstances, in spite of his misgivings, he should agree to accept this position.
But I ask the Secretary of State whether the Paramount Chief has signed the Constitution. As I understand, it comes into force through an Order in Council. Has he agreed to it? Does he have to sign it? What happens if we introduce an independence Constitution and when the country is independent the Head of State refuses to sign Bills?

Mr. Frederick Lee: In 1964, the Paramount Chief signed issues which were accepted as the principles upon which they were going into independence. At the last conference he was not here as a delegate of any description. He is now the Queen's representative. Those who were competent to sign the 1966 Report did not include the Paramount Chief. He was here purely as a distinguished visitor, to look at the situation. There was no point in saying that he had any kind of status which would give him the right to sign. If he had agreed to sign, as a guesture, I would have been happy, but he would not.

Mr. Wall: I am grateful to the right hon. Gentleman for that explanation, but it does not answer my point. The Paramount Chief is to become King and Head of State. As I understand, he then has to sign Bills passed by his Parliament under the Constitution. What hap-

pens if he refuses to sign those Bills because, after independence, he says that he still disagrees with the constitution? It is important that the House should consider this. It would be disastrous if this issue were to come up only after independence.

Mr. Lee: We must take into account the fact that when he becomes Head of State he takes vows to carry out the Constitution. I expressed a little apprehension tonight because he has taken vows which, quite frankly, are not being carried out.

Mr. Wall: I am grateful to the right hon. Gentleman for clearing up that point. He is saying that if the Paramount Chief assents and takes the vows under the 1966 independence Constitution he is committed by those vows to uphold the Constitution, and, therefore, the crisis would come—if there is to be one—at a time which I take would be prior to independence.
I want to turn briefly to the Constitution itself. Can the Secretary of State say when it will be introduced? When shall we have this Order in Council? Can he say something about the problem of entrenchment? He will be aware that these concern the question of the Head of State, land, franchise, the powers of the National Assembly and the Senate, a state of emergency, human rights, and changes in the constitution. The Paramount Chief wants these important matter entrenched so that these issues can be altered only by a referendum of the people plus a two-thirds majority in each House of Parliament. In the White Paper accompanying the Bill this is provided for in a rather different way. Some of these entrenched clauses are entrenched by referendum and others by a two-thirds vote in each House. Why is there this slight difference? Is there any particular technical reason'? Perhaps the right hon. Gentleman could deal with this question.
The Paramount Chief wishes to keep the Privy Council. He thinks it of use to advise him. The Prime Minister has conceded this wish, but we read again in the White Paper arising from the Constitutional Conference in Basutoland that the Privy Council is to consist of the Head of State, the Prime Minister and, as I understand, one representative nominated by


the Head of State on the advice of the Prime Minister. I suggest that that might be a little difficult if the Prime Minister and Head of State do not exactly see eye to eye.
I now come to the question of South Africa. It is clear that hon. Gentleman on both sides of the House realise that dangers are inherent in independence, particularly in a territory which is wholly surrounded by the most powerful military and economic State in Africa. Yet independence is wanted by all political parties in Basutoland. This has even been confirmed and is wanted under the existing circumstances by the United Nations Committee of 24.
A number of hon. Gentlemen have expressed great fears that South Africa might take over this small soon-to-be independent African State. But we must recognise the facts of both geography and economics. Geographically, Basutoland is wholly surrounded by South Africa and economically is wholly dependent on it. I hope—I would ask the Secretary of State to confirm this—that there will be no defence agreement with independent Basutoland. Any such agreement would be useless, because we could not honour it, and, therefore, we should not have one.
It is clear that South Africa could take over Basutoland without having to move a single soldier. All she would have to do is put up tariff barriers against goods from Basutoland and refuse to take Basutoland labour in South African mines, Where about a third of the adult male population of Basutoland work at some time in their lives. I believe, however, that these fears are groundless and that South Africa will help independent Basutoland to the maximum of her ability.
The Prime Minister of Basutoland has held up the Ox-Bow scheme, which is of immense importance to the future of Basutoland and is part of the great Orange River Scheme, until after independence, because he feels that he will get a better deal financially from South Africa than from this country. I believe that South Africa will use the High Commission territories as a step to better relations with the independent African States. Whatever we may feel about the application of apartheid—I agree with those hon. Gentlemen who have said that

the application is wholly wrong and stupid —the theory of parallel development is a tenable theory.
It is rather like Communism. In theory, Communism is very like the original Christianity: it is its application which makes it so evil. The same applies to apartheid—

Mr. Mendelson: We have known for a long time that the hon. Gentleman takes that view. May I ask him not to confuse his view with the view of the Front Bench of the Government which I support, who take a completely different view? The hon. Gentleman speaks for himself.

Mr. Wall: Perhaps. It is not my duty to express the views of the Government Front Bench, but it seems that we reach the same goal by different means. I believe that history will show that South Africa will have even better relations with these three small African States which are within its economic orbit after independence. I believe that it will demonstrate clearly its desire for good relations with these three to obtain better relations with the independent African States to the north.
I will refer to some of the practical dangers of independence. I have said that Basutoland is indefensible and have asked the right hon. Gentleman to state clearly that there is no defence commitment of this country with independent Lesotho. How will Her Majesty's Government and this country be represented in independent Lesotho? I hope that there is no question of repeating what was done in the past and having an ambassador in South Africa representing us in Lesotho, or anything like that.
Finally, there is the question of aid, which has been emphasised by many hon. Gentlemen. The aid to be given to independent Lesotho was referred to in a Parliamentary Answer on 1st July. A study of that Answer reveals that we are undertaking to give both budgetary help and development help, but no sums are mentioned. The only sums referred to in that Answer are £50,000 for the next stage of the Ox-Bow scheme, £123,000 in connection with electricity development, and a much larger sum—£402,500—to cover Basutoland's share of the compensation to British civil servants who will eventually lose their jobs when it


becomes independent. We should have a more definite commitment to financial aid for independent Lesotho than was contained in that Answer.

Sir G. Nabarro: The figures my hon. Friend has quoted from that Parliamentary Answer of 1st July are largely in respect of capital investment and special compensation. They have no relation whatever to the deficit on current account, which is running at about £l½ million a year and which is a very much larger consideration.

Mr. Wall: I am grateful to my hon. Friend for emphasising this point. The Secretary of State will recall that the Morse Commission investigated what should be done for the three High Commission Territories prior to independence. I believe that it stated that about £7 million should be expended on those territories prior to their becoming independent. Has that sum been spent? I doubt it, and I suggest that these territories have been the Cinderellas of successive British Governments. I must, therefore, acquit the right hon. Gentleman of personal blame in this matter.
As these territories become independent, I hope that attention will be paid to the remarks of hon. Members on both sides or about the need for adequate financial help, particularly for the development of agriculture. This is especially important for Basutoland, for while one likes to see industries developing in these territories it will probably be a long time before they are developed on a reasonable scale in Lesotho. There is some mineral development there, but the main hope lies in agriculture and I hope that we will be generous in our financial help.
I pay tribute, on behalf of my hon. Friends, to the Queen's Commission, the Speaker of the Basutoland Parliament and all the British civil servants who have made independence feasible. They have served their country well and I am sure that the leaders of all the political parties in Lesotho will agree with that statement. Relations between our two countries have always been excellent and I believe that independence will reduce the stesses and enable Lesotho to cooperate more closely with the greatest economic power in Africa today.
To do so, and to maintain its own strength, independence and integrity, Lesotho will require national unity and a strong Government. The people of that country have already demonstrated that they appreciate this in the decision of the Constitutional Committee, which specifically refused to divide power between the Prime Minister and the Paramount Chief. I hope that the Paramount Chief will accept this decision of his own countrymen, his supporters and his loyal subjects. Much depends on whether these two men—the Prime Minister and the Paramount Chief—can work together. They must work together for the future of their nation.
I believe that independent Lesotho will set a great example in race relations to the rest of Africa. I hope that these brave mountaineers will overcome the difficulties inherent in independence and that Lesotho will live and prosper as an independent State and as a member of the Commonwealth.

12.14 a.m.

The Under-Secretary of State for the Colonies (Mr. John Stonehouse): I congratulate the hon. Member for Haltemprice (Mr. Wall) on his maiden speech from the Opposition Front Bench. He speaks with great experience on these matters, and we look forward to hearing him on many future occasions.
I endorse what he said in his closing remarks, particularly the tribute he paid to the civil servants who have served Basutoland for many years. All concerned must be grateful for the work they have done. I also endorse much of what the hon. Gentleman said in his opening remarks, although I violently disagree with him about the position of the Paramount Chief.
The position of the opposition in Basutoland has been inconsistent and, I believe, rather stupid over the question of independence. As has been pointed out, Mr. Mokhehle and his friends were signatories to the unanimous report of the Basutoland Constitutional Commission in 1963. The report laid down the basis for the constitution of Basutoland before independence and the constitution of Lesotho after independence. Mr. Ntsu Mokhehle signed it, as did others who have since spoken against the constitutional provisions which we ask the House to accept. They signed the report because


at that time they thought they would win the elections which were due to take place at the beginning of 1965. It was only after those elections that their attitude began to change.
It would have been wrong for this country to turn upside down the pledges that had been made in 1964, and since, that if Basutoland asked for independence by resolution in its own Assembly we would grant it on the basis of a constitution that they themselves had worked out and unanimously agreed among themselves. I believe—and here I agree with the right hon. Gentleman—that if we were to delay independence on those terms because we were giving in to the objections of the parties that represent the minority in the Assembly—let us talk about them as the minority, because they are a genuine minority—we should create more trouble in Basutoland and would not add one iota to the unity which must be achieved there, to the need for which every speaker in the debate has paid heed.
I want to answer some of the detailed points raised by the hon. Member for Haltemprice. First, representation of the United Kingdom will be by High Commissioner and will have nothing to do with the Ambassador in the Republic. There will be no defence agreement, because none has been requested.
The entrenchment provisions are clearly laid out on pages 20 and 21 of the Report of the Basutoland Independence Conference, 1966, Cmnd. 3038. From these, the hon. Gentleman will see that there are some specially entrenched provisions, such as the position of the Paramount Chief, human rights and freedoms, reserved land, and so on, which need a complicated procedure before they can be changed, namely, that they must be submitted to a referendum and that there must be a majority of the votes cast.
There are other provisions, for instance, those concerning the Assembly and the Senate and franchise, which do not require that complicated procedure and which can be changed if there is support of two-thirds of the members of the House when a Bill is introduced. There are therefore various depths of entrenchment. These points are clearly explained in the Report.

Mr. Wall: The point I was making was that in his submission the Paramount Chief asked that these points should be entrenched both by referendum and two-thirds majority. As the hon. Gentleman said, some are entrenched one way and some the other, but nothing is entrenched by both methods.

Mr. Stonehause: We do not think that that is needed. Provided the essential requirements of the constitution concerning the State, the position of the Paramount Chief, and human rights and freedoms, were specially entrenched in this way, it would be sufficient.
There are points on the position of the Paramount Chief on which I fundamentally disagree with the hon. Gentleman. I assume that in his speech he was expressing personal views and not speaking for the whole Opposition. The Paramount Chief's demand really means a division in the transfer of responsibility to Basutoland at independence.
The Paramount Chief has been asking that in certain circumstances, in what has been called an emergency, he should have special rights. Who will determine what is an emergency and when it exists? If the Paramount Chief decides, all the power is in his hands. It is wrong for anyone to lend support to the idea that we should transfer power to a Paramount Chief who should be the constitutional Head of State rather than to those politicians who have the majority in the Assembly.
Seretse Khama is no longer a paramount chief. He is no longer a tribal chief. He has won his spurs in democratic elections. That is the difference in Bechuanaland, and there are also fundamental differences in Swaziland, which I do not want to go into now. But it would be wrong to give the impression that the Paramount Chief in Basutoland was asking for a similar position to that of Seretse Khama or King Sobhuza in Swaziland.

Mr. Wall: I am grateful to the hon. Gentleman for making this point. I must have made my point rather badly. I was trying to put to the House and explain the Paramount Chief's thoughts in the context of Africa today. I was not agreeing that those thoughts were correct. The Opposition believe that these residual powers transferred to Basutoland


when it becomes independent should not be transferred to the Paramount Chief but vested in Parliament and the Prime Minister.

Mr. Stonehouse: I am glad to hear that explanation. That is the position we take. We think that the reserve powers should be transferred to the Prime Minister and his colleagues and that the Paramount Chief should have the position of constitutional Head of State. This, after all, was the view of the Constitutional Commission which reported in 1963, which, as I have said, was unanimous. I shall quote the words, because this whole question is important:
No aspect of our work has given us more anxiety than that of devising the appropriate status for Motlotlehi. After much thought and lengthy deliberation we have come to the conclusion that if Cabinet Government is to work in Lesotho, Motlotlehi must be accorded carefully defined powers … we carefully considered whether Motlotlehi should be accorded discretionary executive functions in the field of external affairs and treaty-making; but we have come to the conclusion that this would not he in the best interests either of Motlotichi or of Lesotho".
That was the unanimous decision of the Commission, and that is the position to which we adhered during the constitutional talks here. It is to be regretted that the Paramount Chief is not prepared, apparently, yet to accept that clear decision. What he is asking for is a division in the transfer of sovereignty. It could only lead to discord and uncertainty, and that would, I think, be quite wrong.
The right hon. Gentleman put his finger on the point: should we add to the prospects of unity and peace and order in Lesotho if we delayed the Bill tonight? I agree with the right hon. Gentleman. I believe that we shall not add to the prospects of peace and order in Lesotho if we hold up the Bill. To do so could only lead to discord and uncertainty, and it would delay the date by which the people of Lesotho can together tackle the essential problems of economic development.
I turn now to the very moving speech of my hon. Friend the Member for York (Mr. Alexander W. Lyon). The whole House was moved by what he said, and I know he speaks with feeling having just come from a conference at which the question of the gap between the newly developing countries and the industrial

States was raised. I agree that this will be one of the biggest problems in the next few years, and our civilisation will be judged by the way we approach it. But, surely, we must give the developing countries the tools to help themselves. We cannot act as latter-day paternalists. We must help them to help themselves, and independence is one of the tools, one of the ways of inspiring them to work harder. It is also one of the ways in which they can go out into the world and get more assistance to help their economic development. Independence delayed would hold back the prospect of Lesotho helping itself in its essential economic development.
This is why I ask my hon. Friend to reconsider his attitude to the Bill. On reflection, he will, I am sure agree that the Bill will help the people of Lesotho to move ahead more quickly in economic development.

Mr. Alexander W. Lyon: I will accept that provided that the Government will give the financial help to let these people help themselves. When are we coming to that crucial point?

Mr. Stonehouse: I shall come to that, but I want first to deal with another point which my hon. Friend raised. He said that the minority parties in Lesotho were, of course, self-interested, but we should none the less reconsider their case for new elections before independence. This process can go on and on for all time. If minority parties, having lost elections, can always demand new elections before independence is allowed, we can go on and on. The fact is that all these parties fought the April 1965 elections on the platform of independence. There is, therefore, a difference between the situation in Lesotho and that in some other countries where there is disagreement about the principle of independence. They were all agreed about it.
Therefore, they should all accept that, whichever party has a majority in the Assembly, that is the party which should lead the Lesotho into independence.
My hon. Friend referred to the economic subservience of Lesotho to the Republic. I think that this is accepted by all speakers. It is accepted by me, and my right hon. Friend and I are conscious of the fact that a large number of people


from Basutoland work in the Republic and Basutoland depends on it for its imports and exports and for its customs income. These are economic facts which we cannot ignore, but would it be right in these circumstances to deny them for all time their independence to run their own affairs?
I was very interested when the hon. Member for Worcestershire, South (Sir G. Nabarro) came into the debate. I thought he was going to be a bull in a china shop, and 1 was right, he was. He made some pungent points and demonstrated the most extraordinary alliance between himself, Mr. Mokhehle and his party, and the Paramount Chief, who apparently all agree that independence should be held up for a few more years. I cannot see that the hon. Member was consistent in the matter of economic aid. He wanted an assurance on the one hand that the deficit would be met and on the other questioned whether we would be justified in giving money to Basutoland which we could not afford.
The question of economic assistance was raised by a number of hon. Members. The figure of economic aid in terms of grant-in-aid was £2,350,000 last year, and this year will be £2,750,000, which is a substantial sum. I want to give an assurance that the fact of independence is not going to change in any way our attitude to providing this sort of assistance.
It was made clear in a reply of 1st July that the Minister of Overseas Development is in continuing touch with the Government of Basutoland and these discussions will continue and will result in substantial amounts of assistance being provided from Britain. I think that it would be wrong, however, for me to try to anticipate the detailed amounts and give precise figures which will be arrived at as a result of the talks between the Ministers concerned.

Mr. David Steel: Mr. David Steel rose—

Mr. stonehouse: No, I must get on.

Sir G. Nabarro: The hon. Member—

Mr. Stonehouse: I am not giving way, and if the hon. Member will only resume his seat I will get on.
My hon. Friend the Member for Penistone (Mr. Mendelson) referred to four

points and suggested a tie-up between the Prime Minister of Basutoland and, as he put it, "elements in the Republic". I agree that some publicity has been given to this, and I think that we must accept that Chief Lealua Jonathan is a realist and realises that he must coexist with the Republic.
I would refer by hon. Friend to that speech of my noble Friend Lord Brockway in another place on 14th July. He said:
I accept entirely that Chief Jonathan, the Prime Minister of Lesotho, is opposed to the policy of apartheid in South Africa; and I do not expect Lesotho, under his premiership, to enter into any association with South Africa which is likely to lessen the opposition of the Lesotho people to the apartheid system within South Africa."—[OFFICIAL REPORT. House of Lords, 14th July, 1966; Vol. 276, c. 231.1
I think that that is the position of the Prime Minister. He made this very point in the final speech which he made to the constitutional conference when he made clear that it was his intention to withstand any intrusion from the authorities in the Republic. He also said that it was his intention to build up the economic strength of Lesotho and make it less dependent on the Republic. I believe that Chief Jonathan is the sort of man who will be able to give Lesotho the lead in this direction that it needs and that we must accept his assurances on these subjects and not be led astray by certain extravagant things that have been written in the Press and said outside this House.
My hon. Friend also raised the question of the military security of the Protectorate. We have had no request from the Prime Minister for any assistance to be provided, and, as my hon. Friend will recognise, there are many logistic problems involved in providing any such guarantees. Indeed, I would ask him to bear in mind that if we were to make provision for so-called military security at this stage, in advance of independence and at a time when there is peace and order in Lesotho—and we all hope that it will continue, that there will be no violence, and that no comments made or Press articles written will give any encouragement to anybody who wants violence—there might be a danger of encouraging the very violence we want to discourage.
Turning to the question of political refugees, Basutoland will be in a very


difficult position in its relationship with the Republic, but I have no reason to doubt that the Government of Lesotho will give political asylum to genuine political refugees. For further assurance on that point, I refer my hon. Friend to paragraph 22 of the 1966 Constitutional Conference Report, where he will read:
The Basutoland Government Delegation assured the Conference that the Government of Lesotho would not sponsor legislation or treaties affecting extradition unless it conformed in its terms to the practice of civilised nations.
I have already given assurances on future economic assistance, and I hope that, in view of my reply, my hon. Friend, and other hon. Members who have raised doubts about the Bill, will now see fit to give it their unanimous support. We hope that from this House —even including the hon. Gentleman the Member for Worcestershire, South (Sir G. Nabarro)—will give a unanimous message to the people of Lesotho: "Despite all your problems, we wish you well in independence after 4th October."

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Fitch.]

Committee this day.

BOTSWANA INDEPENDENCE BILL [Lords]

Order for Second Reading read.

12.34 a.m.

The Secretary of State for the Colonies (Mr. Frederick Lee): I have it in command from the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Bill, has consented to place Her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

The Under-Secretary of State for the Colonies (Mr. John Stonehouse): I beg to move, That the Bill he now read a Second time.
There are certain similarities between Botswana and Lesotho. It was 17 years after Moshoeshoe called for British protection that the Bechuana tribes followed his example. That was in 1855, and for the last 81 years the United Kingdom has had responsibility for Bechuanaland.
I do not think the House would wish me at this late stage to go through all the provisions of the Bill, which are very similar to the provisions in other independence Bills. Nor would hon. Members wish me to weary them with a long description of the constitutional progress in Bechuanaland. I want, however, to refer to the period in which there was the beginning of a breakthrough in the progress in constitution forming in Bechuanaland. This came about in 1963 when all the political parties and all the important groups which were represented in the talks that took place in Bechuanaland came to unanimous agreement on the constitution which should be introduced in March, 1965. That constitution was the one which will form the basis for independent Botswana.
The constitution provided Bechuanaland with a form of self-government and provided for 31 members to be elected on a common voting roll plus four elected members chosen by the Assembly itself. Her Majesty's Commissioner had special responsibility for external affairs, defence and security, and from 1st May, 1966, also had discretionary powers in relation to the public services. He is, however, required to obtain the advice of the Bechuanaland


Cabinet in the exercise of his responsibility, and in all other matters is required to act in accordance with the Government's advice, subject to reserve powers.
Chiefs cannot be elected to the Assembly, but there is a separate House of Chiefs, which is a consultative body, particularly in relation to tribal affairs. It is interesting to note that the 1965 constitution brought about a situation in which there was a completely nonracial state in Bechuanaland where the European and the African electors had complete equality on the basis of one man one vote. This was a complete change, but it was achieved unanimously and very smoothly indeed. The elections which followed in March 1965 resulted in an overwhelming victory for Dr. Seretse Khama's Bechuanaland Democratic Party, which won 28 of the 31 seats. I am glad to say that one of the successful candidates of the B.D.P. is a European. The remaining three seats were won by Mr. Matante's party. The total poll was 140,000. About 75 per cent. of the electors voted, and the B.D.P. secured about 80 per cent. while Mr. Matante secured about 18 per cent. of the votes cast.
In the unanimously agreed report, it was stated that the independence and self-governing constitution was intended to be one which would lead gradually to independence. The Bechuanaland Democratic Party, in its election manifesto, had also made this clear. It said:
The party stands and works for independence of Bechuanaland within the shortest possible time and shall use the oncoming period of self-government as a preparatory stage towards attaining independence.
Towards the end of 1965 Bechuanaland sought agreement on the date for independence, and it was announced in October last that the British Government had agreed that Bechuanaland should become independent towards the end of 1966. It was accepted that steps would be taken to enable independence to be achieved by the 30th September, 1966. That date, as the House knows, was agreed at a conference held at the beginning of this year. The main task of the conference was to consider proposals already drawn up in Bechuanaland which had been given general blessing in both the Assembly and the House of Chiefs for the independence constitu-

tion. It envisaged the establishment of Bechuanaland as an independent republic to be known as Botswana.
Apart from the change to an executive President, they were in substance no more than the adjustments required for the 1965 constitution to adapt it to the circumstances of independence, I want to make clear that, before these proposals were debated in the Assembly and the House of Chiefs, more than 150 public meetings were arranged throughout the country at which the proposals were explained to the people, and the meeting of the House of Chiefs was postponed to permit the Chiefs to hold their own kgotlas to explain the proposals to their people. These were attended by Ministers in Bechuanaland. The proposals of the constitutional conference. recorded in Cmnd. 2929, approved Bechuanaland's proposals subject to certain small amendments and confirmed September as the date for independence. It is not proposed that there should be new elections in view of the fact that Dr. Seretse Khama had such an overwhelming majority in the elections last year and that the constitution for independence was fully discussed and agreed before it was accepted.
It is unfortunate that Mr. Matante decided at the conference this year that he could not sign the Report—in fact, he walked out—because, he said, there had not been adequate consultation. We do not agree with him about that. We think that the full processes were carried through, and it was more than made clear that the people of Bechuanaland and the Chiefs agreed with the constitution that was being made in their name.
The House will agree that it is very doubtful whether this progress would have been so smoothly and by such general agreement without the good work of Dr. Khama himself. [HON. MEMBERS: "Hear, hear."] He has played a remarkable part in the development in a short time of Bechuanaland from a Protectorate to the threshold of independence. All will agree about his remarkable statesmanship and outstanding ability. He will serve Botswana well in the days after independence.
I have had the great pleasure of knowing Dr. Khama for many years. I first met him 15 years ago when he gave me some very fine words of advice before I


first went out to Uganda, and I have many limes had reason to value that advice. In those days, he had some trouble himself, but he managed to overcome them and without any bitterness and has now emerged as the elected head of the Government in Bechuanaland. As a result, he will be in a position to serve his country even better than he has before.
Dr. Khama is, in my view, a great man, and I believe that he will be able to give great service not only to Botswana but to many other countries in Africa which will be able to follow his country's example in non-racial co-operation.
I do not want to delay the House long, but I must refer to some of the immense economic problems that Botswana faces on independence. It is a poor and underdeveloped country. It is almost wholly dependent upon the cattle industry and, although this has been developed considerably in recent years since the establishment initially of an abattoir with C.D.C. money and subsequently with the canning factory at Lobatsi, the economy is far from viable.
As in the case of Lesotho, it has been suggested that Britain has done hardly anything to help Botswana to develop. I would agree that up to ten years ago not much was done, and this is something for which both sides of the House must accept responsibility. Too little was done by both sides. But since then a great deal of assistance has been given and a great deal of money provided to help the budget. The figure we are providing in grant-in-aid rose from £140,000 in a budget of £1·3 million in 1956–57 to £2·6 million in a budget of £5.4 million in 1965–66. The final figure for 1966–67 is likely to be higher still. The total budgetary aid over this period, including the current year, will amount to over £11 million. In addition, just under £7 million has been allocated under the Colonial Development and Welfare Act, the most recent allocation being £2·6 million to spend in the two year period 1965–67.
In the period since 1961, Exchequer loans totalling about £1·9 million have been granted, and Bechuanaland has also received £400,000 under the Overseas Service Aid Scheme and £250,000 in technical assistance. The total of this

direct aid in the last decade amounts to about £23 million, which is about £50 per head of our population. If we had provided a similar amount per capita to India and Pakistan in the last ten years, it would have amounted to about £20,000 million, or 10 per cent. of our gross national product.
Although I accept that up to ten years ago the United Kingdom did not do enough, I do not think that we need be ashamed of the assistance per capita provided since then, but there is no disguising the fact that Botswana faces immense problems after independence. It has to recover from the effects of famine. There has been this disastrous drought for five years, and then this year the famine. I would like to take this opportunity to go over some of the facts, because it is right that we should get on the record what has been done.
For five years there were below average rainfalls, with a total failure of the rains in the early part of 1965. This brought on the worst crop failure and drought that the territory has ever experienced for 25 years. As a result, virtually all crops were lost and a large number of cattle died. The rains fell late in 1965, and again in January and February of this year. They improved grazing and water supplies to some extent, but they came too late to make any material effect on the situation. The next crop is due to be harvested in mid-1967 and the famine is expected to continue until then. It is hoped then that the normal rains will provide grazing on a much larger area until next November.
The number of destitute people being fed now is about 115,000, and to give some idea of the magnitude of the problem I would point out that this is out of a population of 570,000. But that is not the really horrifying figure. It is that this total is expected to rise to 360,000 before the famine is over. It is true that money has continued to circulate as a result of cattle sales and the numbers involved are not rising as quickly as was earlier feared, but the cattle losses will probably amount to no fewer than some 400,000 heads, or about 30 per cent. of the estimated total of 1,300,000. The aim is to have 200,000 head of cattle for breeding stock in good condition in the affected areas.
In the very early stages of the famine a local National Relief Fund was estab-


lished, which provided emergency feeding for the first few weeks. Since then, relief needs for both the human and the cattle population have been met, mainly on the basis of food supplies provided free by the World Food Programme. It has also been necessary for Her Majesty's Government to provide funds for the purchase of food needed for periods when World Food Programme supplies were not available.
I am glad to say that Bechuanaland's requests have been met in full. Assistance has been provided in three ways. No less than £458,000 was provided in the grant in aid programme in 1965–66, and approval has been given for expenditure of up to £1,100,000 in the current financial year for the human and cattle feeding programmes. In addition, since the onset of the famine, C.D. and W. grants, totalling £245,000 and an Exchequer loan of £150,000 have been approved for projects associated with famine relief; those are aimed mainly at the opening up of new grazing areas.
Food for 60,000 people was provided during September and October last year, and from then until the end of last month the World Food Programme provided supplies for 105,000 people. Under a new one-year programme, which came into effect at the beginning of this month, the W.F.P. is providing further supplies for up to 360,000 people. Much of this will be on a food-for-work arrangement, and this will encourage the people to help themselves. In addition, the W.F.P. is implementing a five-year supplementary feeding programme for children and for pregnant and nursing women, also beginning in July, together with stock feed for the period up to the end of November. The total value of this aid is about £5,700,000.
I should like here to pay a tribute to organisations of a voluntary nature, such as Oxfam, War on Want and Christian Aid, all of which have done such magnificent work in helping Bechuanaland in its grave situation. No fewer than 12,000 children under five years of age have been helped by the supplementary feeding programme jointly provided by the Save the Children Fund and the Red Cross. The voluntary work which has been done has been enormous, and I want to add to this the long-term work done by Oxfam, in association with

certain co-operative societies, to try to establish the basis of the co-operative element which will help Botswana in the years ahead to avoid, providing there are rains, the problems of backwardness in the territory.
At the beginning of the year we were submitted a plan by the Bechuanaland Ministers for a £1·3 million programme of rehabilitation following the famine. Regretfully we had to make it clear that additional development funds for this purpose could not be made available within the limits of the overseas aid programme. Details of the programme were sent to the voluntary organisations to which I have already referred. It has recently been announced, and I am very glad that this has been done, that the Freedom From Hunger campaign, in cooperation with Christian Aid and Oxfam, have undertaken to provide the sum of £412,000 for various items within the programme, aimed at the extension of agricultural education and development. I am sure that the whole House would want to pay a tribute to the voluntary organisations which have undertaken this tremendous work.
As has already been said in the debate on Lesotho, Botswana is not in the position of Lesotho in that it has a larger area and more resources. It is a country the size of France, and although it is under-developed there are prospects of mineral development. Copper, for instance, may be exploited in the future. Providing Botswana has economic assistance from outside and has the organisation to attack the problem of development, it has the eventual resources to develop.
Word will go out from this House to Dr. Seretse Khama and his fellow Ministers that we wish them well in this great adventure of developing Botswana. Let us pay a tribute to them for having the courage to grasp the opportunity as well as the challenge of independence. Let them use this prospect of independence to develop their country and to make it a better place for all the Botswana to live in.

12.53 a.m.

Mr. Richard Wood: In spite of the closing words of the Under-Secretary, I have no doubt that some of the fears expressed in the last debate will


find some echo in this one. I thoroughly welcome this Bill and would like to give it my support. When the Under-Secretary took us back 15 years to the events which were then taking place in Bechuanaland, I found myself thinking of the debate that we had in June 1951, when there were very few of us sitting here then who would have confidently looked forward to the granting of independence to that country at the end of September 1966.
Whatever arguments we may have had tonight about mandates elsewhere, there is room for very few in relation to this country. Dr. Seretse Khama's Party won the elections last year by a majority, of which most of us would be envious, having said perfectly clearly in their election manifesto that the party stood and worked for the independence of Bechuanaland within the shortest possible time. The hon. Gentleman has already spoken of the difficulties facing this new nation. I am convinced that under Dr. Seretse Khama's leadership there are likely to be very few illusions about the difficulties facing that country. I find it impossible to read unmoved the speeches that he made at the independence conference especially his closing works at the conference's end in which he said:
We appear to have rounded the last bend in the track of our journey and would seem to he out in the straight toward the end.
The use of that sporting metaphor shows that the future President is very much at home at Epsom and Newmarket. He went on to say:
You will realise this can only be to the very great satisfaction of myself and all people in Bechuanaland. Yet one's feelings are nevertheless a little mixed; there are also both a strong measure of nostalgia for present security and relationships, and a measure of trepidation in respect of the future.
I do not think that the Under-Secretary was in any danger of minimising the difficulties. Certainly, there is no point in any of us doing so.
Again, there is the difficulty of Botswana's geographical position. It is obviously different from that of Basutoland in that it is not surrounded by the Republic of South Africa, but it has its difficulties. The economy is dependent on one product and is in need of diversification, and there is the continuing danger, which is in all our minds and

about which the hon. Gentleman spoke movingly, of drought and famine, as has happened so recently. These are formidable problems, and it is little wonder to any of us that Botswana looks hopefully —I hope, not too hopefully—to Her Majesty's Government to provide enough financial and other help to make independence a reality.
A few hours ago we were in the middle of our two-day economic debate and in these circumstances it is, I suppose, impossible to be over-optimistic about the outcome of Bechuanaland's call for help. I understand that the Minister for Overseas Development has promised an answer to this question next month. I hope that we can be assured, as far as the Minister can do so when he replies, that Her Majesty's Government have both heeded this call for help from the country and will come to its aid as soon and as generously as possible.
I am confident—at least, I hope that I have reasons for confidence—that most speakers in this debate will join the Under-Secretary and myself in wishing well to this nation that is soon to get its independence, but I hope very much that we shall wish it well not only by our words, but by the actions of the Government in giving all the help they can.
I understand that Botswana will continue as a full member of the Commonwealth. Here we have a small country situated among the racial fears, suspicion and bitterness which divide Southern Africa. Its leader called these racial fears, suspicion and bitterness—I quote from a speech which he made at the opening session—
the unnecessary conflicts between black and white.
He is aiming at a society
in which each individual will have an equal right of expression, and of opportunity, no matter what his race or colour.
My concluding words are that, small it may be, but that a triumph in Botswana in the future could teach a great deal to a world which is trying to tear itself apart.

12.59 a.m.

Mr. Frank Judd: I would like to join those who tonight have welcomed the Bill and to congratulate all those, in this country and in


Bechuanaland, who have worked towards its success. This view will be particularly warmly and strongly held by those of us in the House who have had the privilege of enjoying the warmth and spontaneity of the hospitality of the people of Botswana.
Probably no country can have approached independence in a condition of greater political stability but,. on the other hand, with a more dismal economic situation. It is fair to say that for half a century after the pressure by Rhodes to get a route to his interests in Rhodesia, combined with the fear of German expansion in South-West Africa, led to the creation of the Bechuanaland Protectorate, there was virtually no economic and social progress. In fact, there was no evidence of interest in economic and social progress on the part of British Governments until the 1920s. Well into the 1930s, we had reports such as that by Sir Alan Pim, which pointed out that we were spending £1,000 on the education of a small number of white children in the territory, but only £100 on the education of 8,000 African children.
That is understandable, because in the South African Act of Union of 1909, there was reference to the eventual admission of Bechuanaland into the Union, and that intended policy was underlined by the fact that until recently the capital of the Protectorate was Mafeking; in other words, the country was administered from outside its own boundaries. Furthermore, there was very little move towards any localisation of the civil service in the territory.
All this remained pretty gloomy in prospect until 1960, when South Africa left the Commonwealth. We then realised that we had to work out an alternative viable scheme for the country. If we look at the aid given since 1960, we see that it has not come up to any-think like the recommendations of the Morse Report in 1960, nor anything like the recommendations made by Sir John Maude when retiring as High Commissioner in 1962. What is worse, we know that there is considerable economic and mineral wealth in the territory which we could exploit if adequate investments were made.
If we are to see progress in the country, higher development spending is essen-

tial. It is essential for economic take-off, and it is certainly essential if we are to eliminate in Bechuanaland the need for budgetary support. But, if good use is to be made of increased development spending, we must also see a strengthening of the administrative machine. At the moment, as I understand it, we are giving budgetary aid in the neighbourhood of £3 million per annum, and it could be claimed that, to some extent, it is wasted. With an extra £2 million on this front in grant in aid, it would be possible to strengthen the administration to the point at which we could make more sense of capital aid.
The Bechuanaland Government are looking forward to grants for capital budget in the neighbourhood of £5 million, but they only believe that it would be necessary for the United Kingdom to contribute £1.4 million of that sum. They point out, with some reason, that Britain holds the key to future development. If we are prepared to make the critical investments at this stage, the interest which has already been shown by other countries, particularly in Scandinavia, will be forthcoming.
It is also important at this juncture to see the relative futility of some of the isolated attempts at development in Bechuanaland, unless they are looked at in the context of the overall needs of the territory. For example, it is planned at present to establish a new agricultural demonstrators' college. There will be little purpose in that college unless there is adequate secondary education in the country to prepare students to the point at which they will be able to make the best use of the training available. There will be little point in training students unless funds are available to employ the new trained personnel. If the trained personnel are to do their work adequately, there must be credit and more adequate marketing co-operatives available for the pupil farmers with whom they will be working.
It is obvious that in this territory, as in others, education and agriculture must take priority in development. Yet, if one looks at The educational position of Bechuanaland as it approaches independence, there is no room for complacency. In the current year only a third of those pupils qualified to follow secondary education are able to find places within


secondary education. There are only 47 secondary school teachers in the territory, and, of those, only five come from Bechuanaland itself. In the year before independence, there was only one graduate in Bechuanaland from any university in the world.
If we switch our attention to agriculture, the other priority, we see that in Bechuanaland there is a tremendous need for adequate systems of irrigation. The absence of these is always evident and is particularly well illustrated in this time of drought when, as we have heard, by the end of this year perhaps more than 50 per cent. of the population will have to receive famine relief.
I draw the attention of the House to one other aspect of development. If we are to see the community drawn into active participation in developments, the importance of the Community Development Department cannot be overestimated. According to cautious estimates within the Community Development Department there is a need for more than 100 provincial officers, and at the moment there are barely half a dozen. I submit that the significance of development and of economic assistance towards development cannot be overestimated if we are to give this act of political independence genuine meaning.
It has been pointed out this evening, with great reason, that one of the outstanding points about Bechuanaland as it approaches independence is its political stability and responsible leadership. This has been well evidenced by the absence in recent elections of cheap and easy slogans. What we have seen by political leaders, led by Seretse Khama, is a concentration on the importance of building up the economy in order to build up the social services of the territory.
I think that we should be cautious, because if we fail Bechuanaland at this stage, if we fail the political leaders whom we have commended this evening, we may quickly see a deterioration in the political stability in this area. A deterioration in Bechuanaland obviously may have dramatic consequences, for this is the centre of one of the most sensitive areas in the world, and it is quite clear that any difficulty in this territory could prove the flashpoint for an explosion in the whole southern part of Africa.
I think that we can be more positive and less gloomy. A great deal of time has been given by the House to the problem of promoting a multi-racial society within Southern Rhodesia. Here we have an outstanding opportunity to enable the territory lying between Southern Rhodesia and South Africa to make a go of a multiracial stable society. We have an outstanding chance of enabling this territory to do it by investing what is a relatively small amount of extra money in the territory. I believe that the eyes of Africa and of the rest of the developing world are very much on us in our policy in the Protectorates, because it is here that we can demonstrate our good faith and the degree to which we really stand by the genuine development, independence and freedom of these people.
If we fail them for this sum of money which is minute compared with the expenditure on armaments with which we claim to be defending freedom in the world, we will have taken one more fatal step towards the ominous division of the world on purely racial lines, cutting right across the world's surface.

1.8 a.m.

Mr. Douglas Dodds-Parker: I rise for a few moments to support what has been said from both Front Benches in giving a welcome to this Bill. I am sure that there is one aspect of this. if I might refer to it briefly, which will delight constitutionalists and many of the friends of the Khama family.
The House will recall that at the time of the post-war Socialist Government Ministers saw fit to withdraw Tshekedi Khama, the Regent of Bechuanaland, and his nephew Seretse, and when I had the privilege of being in the Commonwealth Relations Office we were able to set to start restoring the situation in Bechuanaland.
The noble lords Lord Ismay and Lord Swinton, when I was the Under-Secretary, managed to make arrangements for Tshekedi to return home. I have vivid memories of Lord Ismay and Tshekedi Khama discussing various matters, particularly cattle. I remember farmer Ismay and farmer Tshekedi talking about the practical realities of the sort of cattle that might do well in Bechuanaland and the developments which were envisaged


following on the post-war period when we were starting to provide resources to develop parts of the world which hitherto had been somewhat neglected. Then, a year or so later, under my right hon. Friend the Member for Kinross and West Perthshire (Sir Alec Douglas-Home) arrangements were made for Seretse Khama to return home—to the joy of the whole House—not to be hereditary Chief of the Bamangwato but to go back and play his part in public life. He must have read "The Apple Cart" and, like King Magnus, have set up, as an administrator, to apply himself to acquiring elected office and to proceed, as he has done, to be head of the country in an elected capacity. All constitutionalists and readers of Shaw will welcome the way in which Dr. Seretse Khama, as he now is, has put into effect what appeared at some time to be the somewhat far-fetched idea put forward in the play.
Throughout all this, like his uncle, Tshekedi Khama, in very difficult personal circumstances he has borne himself with the greatest dignity, patience and courage. I am sure that Tshekedi Khama, wherever he may be. is watching, with great pride and affection the achievements of his nephew, Dr. Seretse Khama, who will soon be head of one new country at the United Nations.
On behalf of all the friends of Dr. Seretse Khama—and perhaps he has more friends in this House and in the country than he is aware of—we must look forward to this country's proceeding to even greater prosperity.
We realise what he is up against in this enormous territory, with comparatively limited resources at the moment, depending upon variable rainfall. But in so far as the Almighty will help him to overcome these problems, we wish in every way that Dr. Seretse Khama and the nonracial ideals which he has set before us and his country will proceed to great success.

1.12 a.m.

Sir Gerald Nabarro: I do not wish to say anything at this late hour about the constitutional matters alluded to by the Under-Secretary. I shall confine myself solely to economic and financial considerations and a few questions concerning the temporary

arrangements made in Bechuanaland arising from the present regime in Rhodesia.
There is a great affinity between our earlier debate and this one. If the right hon. Gentleman had given us the effective figures concerning financial aid during his speech, instead of leaving it to the Under-Secretary to do so two hours later, we would all have been in bed at a much earlier hour, because the gravamen of my complaints in that debate—as will be the case in this one—was simply that to give independence to that territory has little meaning unless we are quite specific and positive this evening as to how we propose to cope with future deficits.
The Parliamentary Secretary talked at great length about voluntary organisations sending financial aid. I suppose he will accuse me of being a bull in a china shop for alluding to it. But I have learned my Parliamentary manners in a long and hard career, and if he seeks to intervene I shall courteously give way. I shall not refer to him five times and then refuse to give way.
In Bechuanaland the economic and financial circumstances for the future are even more acute than they are in Basutoland. I will give the Parliamentary Secretary the last published figures, bull in a china shop though I may be for doing so. The hon. Gentleman should not grin. He coined this most un-Parliamentary term. In Bechuanaland there is a population of only 548,000, compared with 733,000 in Basutoland. The revenue is £2,300,000, compared with Basutoland's £2,500,000. Bechuanaland's expenditure is £4,300,000, compared with £4 million in Basutoland. Thus, in Basutoland there is a net deficit on current account of £1½ million, whereas in Bechuanaland it is £1·9 million.
Aid was of the order of £3·5 million. The difference between the deficit of £1–9 million and the aid of E3·5 million is accounted for by a capital investment in the territory of £1·6 million. But we may expect the financial requirement of this territory over the next ten years to be about £4 million per annum. In considering independence for the territory, we cannot afford to look at any period shorter than ten years, and we ought therefore to consider the aid required in that period to be approximately £40 million.
I asked a question to which I did not receive a very good answer in our last debate—who is to provide it? The answer given to my hon. Friend the Member for Haltemprice (Mr. Wall) by the right hon. Member for Rossendale (Mr. Greenwood) on 21st July was that a statement on these matters would be made "next month". It looks to me as if the British Government want to get their Bill this week and announce the aid next month. That will not measure up to the kind of financial considerations which I have mentioned this evening—

Mr. Patrick Wall: After we have risen.

Sir G. Nabarro: After we have risen, of course. They will then be inviolate and I shall be able to make speeches only in the country criticising the right hon. Gentleman.
I should prefer more specific information this evening about the financial intention; of the Government. It is not good enough to say, "We will announce them next month, but we do not want to say what they are now."
This is a territory of 225,000 square miles. I join my hon. Friends and hon. Gentlemen opposite in the tributes which they have paid to Dr. Seretse Khama. This territory would not have been brought to this position of near-independence had it not been for his wisdom, statesmanship and leadership. But it will mean nothing to him unless we devise where the money will come from. Very massive sums of money are involved.
I hope that the right hon. Gentleman will not emulate the rude example of his Parliamentary Secretary and say that this pertinacious question of mine, repeated three times in the last debate and now repeated for the third time in this debate, means that I am being a bull in a china shop. On the contrary, it is the only thing which matters in our consideration of the Bill, because all of us, on both sides of the House and in all three political parties, have always accepted the philosophy that Commonwealth Territories should be brought forward to responsible self-government at the earliest possible date and granted their independence. But that independence is valueless to them unless there are the finan-

cial sinews in support of it. I hope that we shall be given something more than an assurance that we may be told, when the House is in recess next month, how much money will be given to Bechuanaland after 1967, which is what the Minister stated on 21st July.
I turn to the strategic considerations. There is no railway in Basutoland. Indeed, there is almost nothing in Basutoland. There is a railway through Bechuanaland, and a vitally important one strategically. It is the sole link by rail between the Republic of South Africa and Rhodesia. It is a principal route by which oil now flows to Rhodesia. There is also the road through Beitbridge, and that is how Mr. Ian Smith's regime gets its oil. I see the Under-Secretary nodding in dissent. If he dissents from what I am saying, he is not alive; he is not "with it". The newspapers are full of pictures of road tankers going via Beitbridge, in addition to rail tankers going through the north-east corner of Bechuanaland.
Perhaps the Under-Secretary will continue to nod in dissent when I say that a company of British infantry is at present at Francistown from a battalion of British infantry in Swaziland. I am pleased to note that the hon. Gentleman does not dissent on that point. What is the future of Francistown to be on independence being granted to Bechuanaland? Is the B.B.C. to have permanent facilities to beam propaganda from an independent territory, Bechuanaland, into another, self-siezed independent territory, Rhodesia?
Why is there no reference in the Bill to special provisions in respect of Francistown? Is the B.B.C. station there beaming propaganda into Mr. Smith's Rhodesia intended only to be of a temporary character? I would like answers to these specific questions. What defence agreements are we to have—Britain and Bechuanaland—remembering that Bechuanaland is not Basutoland and that there are entirely different considerations.
I brought in as a side reference—I would have been out of order had I done otherwise—during our debate on the Lesotho Independence Bill the question of the ruling of the International Court at The Hague in regard to South West


Africa. I do not know what the outcome of this matter will be. None of us knows, and we would be stupid to be dogmatic about it. The quarrel about the status of South West Africa—ex-German South West Africa, which was mandated by the League of Nations to the Union of South Africa in 1920, which South Africa now claims is part of its domestic territory and which Ethiopia and other African States claim ought to be brought under the suzerainty of the United Nations—is a controversial and imponderable matter.
I am keenly aware that Bechuanaland is flanked to the west by South West Africa—which is virtually a part of the Republic of South Africa—to the south and south east by the Republic of South Africa and to the north by Rhodesia. I have apprehensions, in view of the strategic importance of Bechuanaland, about the future, and these apprehensions are not dissimilar to those voiced by the hon. Member for Portsmouth, West (Mr. Judd). Therefore, I press the question upon the right hon. Gentleman: what are our defence arrangements in relation to Bechuanaland? Have we given any assurance that we shall protect Bechuanaland if there are quarrels between her and any of her neighbours, South Africa, Portugal—for Angola is to the north—or Mr. Ian Smith's Rhodesia? What defence assurances have we given, if any, or are we to leave this territory utterly defenceless and say that if Rhodesia, Portugal or South Africa care to make military intrusions we would not go to the aid of Bechuanaland?
These are important strategic considerations which did not directly arise in the case of Basutoland. As the hon. Member for Portsmouth, West said in different terms, Bechuanaland occupies a strategic position of considerable importance. We recognise its importance today by establishing there the B.B.C. station beaming propaganda into Rhodesia. We underline its importance by sending British troops to protect it, and they have been there a very long time.
The British battalion of infantry in Swaziland is now permanently quartered there. I ask the right hon. Gentleman, with what strategic intent? Is it internal security? I am glad to see the Parlia-

mentary Private Secretary disappearing to the Box to secure the answers to my questions, because hon. Members may be certain that the right hon. Gentleman would not know them. I am glad to see the Parliamentary Private Secretary returning so soon.
These are important matters, and notwithstanding the late hour I hope that when the right hon. Gentleman replies we shall not have any repetition of the rudeness of the Under-Secretary of State, who referred to my pertinacity as characteristics of a bull in a china shop.

1.28 a.m.

Sir Douglas Glover: Before intervening on this very important matter, I should like to make a protest to the right hon. Gentleman and the Government Deputy Chief Whip. It is scandalous that the House should be asked to debate two Bills of such tremendous importance to a very large number of people in the Commonwealth at this hour of the night. To start discussion of these two Measures after 10 p.m. shows complete disrespect to Parliamentary procedure and, far more important, to the view that the inhabitants of the two territories will form on the interest this House takes in their future.
Both Bills are sufficiently important to deserve a full day's debate in the House, particularly that which we are now debating. Many hon. Members would like to develop the question of the strategic problem which my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) has just enunciated, and at an earlier hour many hon. Members deeply interested in the problem would have been present. My hon. Friend the Member for Plymouth, Devonport (Dame Joan Vickers), who I see has now left the Chamber, is deeply concerned with the problem and would have liked to contribute to the debate. The House has been very shabbily treated by the Government in bringing these two Bills forward at this hour of the night.
I do not want to say anything that would be looked upon as being derogatory to Dr. Seretse Khama. I have a tremendous admiration for him, and I wish the country of Botswana every success and happiness when it becomes independent. Its people are very lucky to have a man of Dr. Seretse Khama's wisdom to lead them into independence.
I do not apologise for detaining the House at this hour, if the Government bring these Bills forward at this time. I wish to raise a matter of transcendent importance. This afternoon, the hon. Member for Carmarthen (Mr. Gwynfor Evans) made his maiden speech and spoke of the "dying Welsh nation". I think that most hon. Members felt that he was going a little too far there, particularly when we recall that at this time there is in New Zealand a British Rugby touring team most of the members of which are Welshmen. In that sort of atmosphere, it is difficult to think that the Welsh nation is dying, but, of course, the hon. Gentleman had something to put to us, and it touched the hearts of most Members of the House.
In Bechuanaland there is an enormously important problem which has not been referred to in the debate so far. When the Dutch first settled at the Cape, they did not displace the Bantu. They displaced the bushmen. When the Bantu travelled down from the northern part of Africa into the South, they did not come up against the white man; they came up against the bushmen. The original inhabitants of the southern part of the continent were the bushmen, and over the centuries the bushmen have been pushed by the white man and by the Bantu largely into the Kalahari Desert which occupies so much of Bechuanaland.
It is believed—I think that the figures are reliable—that there are in Bechuanaland the best part of 50,000 of these stone age aborigines, the original inhabitants of the whole of Southern Africa who now live in the less salubrious parts of this not particularly salubrious area. The bushmen get the worst of both worlds. When there is drought, they suffer greatly, living on the fringes of the desert. Those who are in contact with the Bantu and people of European stock are referred to as tame bushmen, and the remainder who live further in the Kalahari are referred as wild bushmen.
These people have no one to speak for them. We now intend to hand them over—I am not complaining—to the Government of Bechuanaland or Botswana. What safeguards for the future of these people have been written into the constitution, and what shall we in this

country do to safeguard their future interests?
The bushmen are in danger of extinction. There are, without exaggeration, many thousands of bushmen who are virtually chattel slaves of the Bantu, who use them for forced labour and use their womenfolk in a way that no one in the House would approve. The bushmen have a very poor life in this territory. When the elections came and they were given the vote, the bushmen were delighted because, for the first time in their history since the advent of the white man and the Bantu in Southern Africa, they felt that they were being treated as human beings.
I say these things to give the House an idea of the status of the bushmen in these territories. By their very nature, bushmen have no education. They have no leaders. No one will start a League of Free Bushmen. No one will start a campaign of terrorism on the Bantu. They have no bushman Nye Bevan—more is the pity. They need leadership, and they have not got it.
There is, therefore, a double responsibility on us in this House when we are handing over control of the future of these people to the Bantu who, despite Seretse Khama's wise leadership, quite literally look upon these people as less than human. This is not exaggeration. The Bantu look upon the bushmen, particularly in the Ghanzi area, as being less than human, and we are handing over this country to independence. I want to know from the Secretary of State what safeguards he has written into the constitution to protect the bushmen. I am sure that the answer I shall get will be that they are not enslaved as much by the Bantu as I think they are, and I will agree to differ with him. He will say that he is quite certain that their future will be assured and they will develop with the Bantu. Again I shall agree to differ with him, because in actual fact both the whites and the Bantu think that the real answer to the problem of the bushmen is to let them die out as quickly as possible. There may be those who think that this is inevitable, and yet these bushmen, when they are properly treated and given the encouragement of crop preservation and cattle conservation, and when water holes


are dug for them so that they can get water supplies, show that their level of intelligence is very much higher than most people think, and so they have been given the opportunity to develop.
From the educational point of view, it is very difficult to raise their standards, because there are no more than half a dozen people who speak the bushmen's language. There are only 50,000 of them, but unfortunately they have three different languages. So the problem is not an easy one. I am not suggesting for one minute that even if we remain in charge of the problems of Bechuanaland we would find it easy to solve their problems. When I was referring to slavery I was speaking as the Chairman of the Anti-Slavery Society, which has taken a great interest in the bushmen for many years. This is probably the last opportunity we shall have, apart from the Committee stage, to nail anyone of the Government Front Bench while he is still responsible. In a year from now I may make an impassioned speech about the injustices perpetrated upon the bush-men and the reply will be that I have told a moving story to the House but that the Government have no responsibility. If I raise the matter on the Adjournment, no one will come to reply, because the Government will say that they have no responsibility because it is an independent country. Therefore, the House is right to demand from the right hon. Gentleman that he should state what is to become of the little bushmen. Is the bushman to fend for himself in the hostile world of the 20th century, or is he abandoned to extinction?
The right hon. Gentleman, Dr. Seretse Khama and the other people in these negotiations must have discussed this problem. I would be horrified if they had not. It is said that these poor and voiceless people have been taken into slavery and even shot by the white settlers and the Bantu. Are their problems to be shoved under the carpet, if they have a carpet? What is laid down in the constitution to protect the rights of this defenceless minority in a country of 550,000 people? Part of that 550,000 population are the 50,000 bushmen, who are leaderless, voiceless, their problems unheard, and who are looked upon by the majority as almost less than human. Has

the right hon. Gentleman written into the constitution of Botswana any safeguards for the future, the development and the status of these people?
The Minister will probably reply that because a country is to get its independence he cannot tie down this Government as to what they will do with any part of the population, whether it be a majority or a minority. There is that difficulty, but, as my hon. Friend the Member for Worcestershire, South has pointed out, Botswana will receive for many years into the future a considerable amount of aid from the United Kingdom. The House has a right to demand from the right hon. Gentleman an assurance that when we give aid to Botswana—and we all wish its people well—it should be laid down as a condition that as the bushmen constitute 10 per cent. of the population we want 10 per cent. of our aid to be earmarked to deal with their problems. If we do not lay down some such condition, none of that aid will go to the bushmen, the Bantu will see that they are exterminated, they will have no friend or defender, and no voice at all at the United Nations or elsewhere.
Ten per cent. of our aid might be too much to earmark for these people, but we could insist that 5 per cent. should go to them. Before we hand over the affairs of these defenceless people, we have a duty and a responsibility to say that when we give aid to Botswana in future some portion shall be definitely earmarked to deal with the problems of people who, after all, some 400 years ago occupied the whole of Africa and are the people who have been dispossessed.

1.42 a.m.

Mr. Eric Lubbock: I agree with the hon. Member for Ormskirk (Sir D. Glover) that it would have been better had this Bill been taken at a reasonable hour. A great deal of interest is taken by the House in the problems of Bechuanaland, and many hon. Members have expressed their admiration for Dr. Seretse Khama this evening. Many of us are his personal friends, and we should have liked to have had the opportunity of raising these various problems at a reasonable hour during the day, when many more hon. Members could have participated.
The hon. Gentleman has said that he has known Dr. Seretse Khama for 15 years. I have known him for 21 years and can look back to the time when he and I went to Balliol at the same time in 1945. I never imagined that 21 years later in this House I should be congratulating him on the coming independence of his country, of which he is now the head. It would have seemed absolutely incredible then, but Dr. Seretse Khama has been a tremendous leader of his country. In spite of the vicissitudes through which he has passed, he bears no grudges and has no bitterness on account of his past treatment by this country, which has been extremely shabby. He feels good will towards this country, and we must admire him for it.
Bechuanaland is achieving her independence in uniquely difficult conditions. Both politically and economically they are more than have applied to any other Commonwealth nation that has so far attained independence. She is surrounded on all sides by white supremacist nations; on the south by the Republic of South Africa, on the north by Rhodesia, and to the west by South-West Africa, which, following the deplorable decision of the International Court, looks like remaining part of the Republic of South Africa for a considerable time.
As the hon. Member for Worcestershire, South (Sir G. Nabarro) has said, it would probably be out of order to go in detail into that matter in this debate, but one might have hoped that ultimately Botswana could have obtained another outlet to the sea which would have enabled it to export her products and import manufactured goods without being tied to the South African economy as she is at the present time. I still hope that that deplorable decision may be reviewed and that ultimately South-West Africa will be detached from the Republic, not only for its own sake but because of the benefit that will be to the economy of Botswana as a whole.
The hon. Member for Worcestershire, South also mentioned the economic situation of Botswana compared with that of Lesotho and showed that in material respects Botswana is worse off. If we go back over the years we find that the history of this territory is one of continual neglect by the British Government, of which we should be publicly ashamed. We

find that budgetary aid was not given until 1956. It was not given until the surplus balances built up during the war had been exhausted. In the Chandler Morse Report it is shown that the budget was deliberately held down in Bechuanaland during all those years because we were not willing to give a grant in aid. We read in that Report:
In the ten years succeeding the war, the policy of husbanding the Territory's surpluses and so postponing the day when a grant in aid would be imperative, meant that the Territory made very slight progress; the standards of the public services, which were never lavish, became relatively depressed to a level from which recovery might well have been far slower than the decline.
When one bears this in mind one cannot make the sort of comparisons which the Parliamentary Secretary made between the amount of aid given per capita to Botswana and to India which is far better endowed with material wealth and in which civilisation has been working its good influences for many centuries. There is no comparison between these two situations. It is quite unrealistic for the Parliamentary Secretary to look at the aid we have given since 1956 in that light. We had 80 years of neglect to make up for in Botswana since 1956 and we have not succeeded in doing so hitherto.
If we look at Colin Legum's article in the Observer the other day we find the history of this matter showing that the gap between the contributions made by Britain and the needs of the Bechuanaland economy is indeed very wide. In fact Mr. Legum underestimates the need for the future identified by the Bechuanaland Government. I think the hon. Member for Worcestershire, South also underestimated it. He said that in the next 10 years £40 million will be required in grant in aid alone, but I do not think this would nearly meet the economic needs of the Territory.
Unfortunately, we are not in a position to make any judgment in this matter, because the Minister of Overseas Development has refused to publish the Report which was presented to him in May this year which formed the basis of the economic discussions that the Bechuanaland Government delegation had here recently. It is unfortunate that we have no firm idea of what the Government are prepared to offer in the form of grant in aid and capital development to


this country before we pass this Bill. This is the last opportunity we shall have of being able to criticise the Government if we think they have not done enough.
Before the debate is concluded, I should like the Minister at least to give us the broad outlines of the gap between the Report of the Ministry of Overseas Development and the requests made by the Bechuanaland Government so that we can see whether a compromise is possible even in the present state of our foreign exchange balances. I want to mention one or two aspects of the economic difficulties which the country has to pass through now it has attained independence. One which has not been mentioned so far but which may be of considerable importance particularly, bearing in mind the situation of the country relative to the Republic of South Africa, is the question of a customs union with that country.
The three countries—Lesotho, Swaziland and Botswana—have a Customs union with the Republic of South Africa under which an agreed proportion of the customs revenue is distributed to them. I understand that it is the contention of Bechuanaland that it is not receiving its rightful proportion of these dues. In 1963, a study was undertaken by a Colonial Office statistician, who had been at Exeter University. He was engaged to study the division of the customs and excise revenue between the three High Commission Territories and make recommendations on adjusting them if appropriate. The statistician, Mr. Lewis, was not asked to examine the total amount of revenue which was to go to the three territories together. This was a grave mistake. Of course, it resulted in everyone accepting that the amount of the revenue distributed from the total received by the Republic was fair to the territories themselves, notwithstanding that there may have been some inequities as between the three territories one to another.
The Bechuanaland Government, I understand, made representations to Her Majesty's Government that its proportion should be reviewed and some new arrangement negotiated with the Republic prior to the attainment of independence because, of course, it will be much more difficult for Botswana to argue its case

on its own than for the British Government to do so on its behalf at this stage, when the agreement might be renegotiated with the Republic covering the three territories together.
Then there is the question of education. This is the most serious need of Botswana after independence. I do not think that the Ministry of Overseas Development has really got the correct view of the size of the need. If the country is to be self-sufficient in trained manpower, it needs to build up to a rate of 250 school certificate passes per annum as quickly as possible. Yet, in the whole country there are only 1,325 secondary school pupils at the present time. This is a pitifully low proportion of the children. The 1965 figures showed that there were just over 66,000 children in primary schools, with only 1,325 going on to secondary education. If the country is to become self-sufficient in even the lower clerical posts, it is essential that more money be put into secondary education.
There is a long back-log to make up. In the past there was no policy by successive British Governments for localisation of even junior jobs such as typists, clerks and accounting machine operators and so on. Therefore, if these junior posts, and, of course, the senior posts as well in the Civil Service, are to be filled by Africans from Botswana, there must be a crash programme of secondary education. The need for this has been under-estimated, and I am glad that the hon. Member for Portsmouth, West (Mr. Judd) also made this point.
Finally, I want to refer to the dreadful state of the agricultural industry which Botswana faces. As the Under-Secretary of State said, the country has had the worst drought within living memory. The national herd of cattle has been reduced by as much as 30 per cent. In some localities I understand that the figure has been even higher than this overall total and has reached 50 per cent. of the cattle in some areas.
To give some idea of what this means, I understand that about 200,000 cattle died last year because of the drought and it is calculated that recovery would take at least five years, during which period, from past climatic experience, the country may have entered another period of drought. The numbers receiving famine


relief food will, I understand, have risen to about 300,000 and, by the middle of 1967, when the next crop is due to come in, that figure will have reached 360,000 out of a total population of about half a million.
These are staggering figures, and I must say that I was disturbed to hear the Minister say to what extent the Government are relying on voluntary agencies. Surely, despite our own economic situation, we could give more by way of a major contribution to the temporary difficulties facing Botswana as she gains independence. I would have thought it quite obvious that the drought would not have been so serious in its effect if hydrological work had been done when we were in a position to carry it out. Hydrological data for the country is almost completely lacking, and I understand that assistance has been sought for establishing a national hydrological service from the United Nations Special Fund. I hope that counterpart funds, which are an essential for receiving this aid, will be provided by Her Majesty's Government.
If we were to harness the resources of the Okavango swamp, this would make a great difference to the country's economy. It should be possible to construct a canal from the swamp to Rakops on the Botletle river which would provide between 500 and 1,000 cubic feet of water per second at Lake Dow, from whence it could be piped fairly easily to the main areas of population in the south-west of the territory.
But while this long-term programme is being considered money is urgently needed for immediate needs such as bore holes and stock dams. The record of successive British Governments in Bechuanaland is indeed shameful, as is shown in the Chandler Morse Report, and in the capital aid which we give to the country after independence we should bear in mind the most important need for developing all these water resources.
I have mentioned just a few of the enormous problems facing the newly independent Republic of Botswana. They are a courageous people, fortunate in having the enlightened leadership of Seretse Khama as they approach the threshold of independence, and we on these benches hope that, in spite of the difficulties facing Britain in her overseas payments position at present, the Govern

ment will recognise our moral obligation to sustain the people of Botswana and help them as generously as we can in keeping alight the torch of freedom in this southern half of Africa.

2.0 a.m.

Mr. Patrick Wall: I would like to reiterate the point made by my hon. Friend the Member of Ormskirk (Sir D. Glover) and the hon. Gentleman the Member for Orpington (Mr. Lubbock), about the late hour at which we are taking these two very important Bills. Those responsible for the Business of the House under-estimate the importance of this kind of debate to Africa as a whole and to the countries of Lesotho and Botswana in particular. This is the last time that we are to discuss these territories for which we have been responsible for many years. It is a great pity that we have to pay our farewell to them between the hours of one o'clock and three o'clock in the morning.
It can be said that a technical case can be made out to show that Botswana is less ready for independence than any Commonwealth nation, except Somaliland, and the House will recall that there were special circumstances about Somaliland, which joined with an ex-colony of Italy to become an independent State outside of the Commonwealth. From the political point of view, although Bechuanaland has had an Advisory Council since 1920, it had no executive or legislature until 1961. Four years later it received internal self-government and only one years later it has become independent. As hon. Members on both sides have said it is economically non-viable.
However, I join with hon. Members who have welcomed this Bill. The fact that we are able to do so is a tribute to Dr. Seretse Khama, to whom hon. Members have paid generous tribute. I would also like to pay tribute to his wife, who has loyally remained by his side through all of his ups and downs and difficulties, and now takes her rightful place as the first lady of Botswana. I would also like to echo the tributes paid by my hon. Friend the Member for Cheltenham (Mr. Dodds-Parker) to a man whom I had the privilege to meet on a number of occasions and whom I still believe to be one of the greatest statesmen produced by the African continent—Tshekedi Khama, the uncle of the new president.


He is now dead, but there is another old friend to whom I would like to pay tribute, a man older than Dr. Seretse Khama but who is still young in body and mind and that is Chief Bathaen II, who deserves very well of his country.
It is because Botswana had such able leaders, who have always insisted on complete racial co-operation and because, as a result of the recent general election, Botswana now has a stable Government with a substantial majority, that independence will be a political success. What worries this House is can independence be an economic success? This argument was deployed with great skill by the hon. Gentleman the Member for Portsmouth, West (Mr. Judd) and the hon. Gentleman the Member for Orpington. It has been pointed out by the Under-Secretary that Bechuanaland is an agricultural country, and that she has lost something like a third of the total cattle population of the country.
I want to ask about mineral development. Some years ago the Roan Selection Trust signed an agreement with the Bamangwato tribe to develop mineral resources in their territory. I presume that that agreement is still in existence? Can the Secretary of State tell us what future he thinks there is for mineral development in Botswana?
We have seen from Parliamentary Questions that the grant in aid has varied in the past five years from £1 million to about £2½ million, increasing yearly. Yet my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) made the point that at present the deficit on current account, in his estimation, is £1·9 million. He estimated that this could increase on independence to £4 million. The House would like to know before we pass this Bill more details of the budgetary aid, development aid and technical assistance promised to Botswana and mentioned in the answer to a Parliamentary Question answered on 21st July. Here again figures are not quoted and we are merely given a general promise of financial and technical help. When he opened this debate the Under-Secretary brought forth a number of figures, rather rapidly, but as far as I could gather they referred mainly to the past and present, not to the future. I hope that the Secretary of State will answer

the question, which was put a number of times by my hon. Friend the Member for Worcestershire, South: what are the financial intentions of the Government towards this newly independent State and member of the Commonwealth, a State which, as many hon. Members have said, occupies a vitally important area in the Continent of Africa?
I turn briefly to some of the problems of independence and relations with South Africa, to which the hon. Member for Orpington referred. I believe that after independence relations with South Africa will be extremely good. I believe that Dr. Verwoerd intends to respect the integrity of Botswana. The question of Customs duties after independence has also been mentioned. I may be wrong, and I am open to correction, but I understand that the three territories concerned would rather make a customs agreement with South Africa after independence than before, because they think that they will probably get a better deal from the Republic when they are standing on their own feet. I hope that the Secretary of State will either confirm or deny this. I believe that South Africa intends that her relations with the High Commission Territories, as they become independent, will serve as an example for much better relations between South Africa and the independent African States to the north.
I believe that Dr. Seretse Khama has a role to play in improving relations between South Africa and the African States. My right hon. Friend the Member for Bridlington (Mr. Wood), in his sincere and able opening speech, gave quotations from a recent speech by Dr. Khama, from which I quote again. that Botswana
has a role to play in Southern Africa and in the unnecessary conflict between black and white".
Botswana has a completely non-racial society and already it is a friend of both South Africa and Rhodesia. We should recall that Dr. Khama's children have been—and, as far as I know, are—at school in Bulawayo, in Rhodesia.

Sir D. Glover: My hon. Friend is quite right to say that Botswana has no racial problem when talking about black and white, but he is entirely wrong if he ignores the bushmen, who, after all, are nearly 10 per cent. of the population.

Mr. Wall: I apologise for ignoring them. I am sure that the House will have listened with interest, and I hope that the Secretary of State will have noted and will reply, to the points made by my hon. Friend, because the future of the bushmen, who, as he has said, are the original inhabitants not only of Botswana but of most of that part of Africa, is of importance to everyone in this House.
I should like briefly to take up two points raised by my hon. Friend the Member for Worcestershire, South. The first is the question of a defence treaty between Botswana and this country. I maintain that Botswana is impossible to defend militarily and I believe I am right in saying that there has been no request for a defence treaty and that Her Majesty's Government do not contemplate any positive defence alliance with Botswana. I hope that any such military alliance will be proved to be completely unnecessary.
As my hon. Friend said, however, British troops are stationed in Botswana to defend Francistown Radio. I stress his request for information about the future of this propaganda station. The Secretary of State will recall that the whole concept of Francistown Radio and the stationing of British troops to defend it—although we still wonder against whom they are defending it—has been attacked by the Opposition in Botswana.
I know that the Secretary of State for Commonwealth Relations always takes a particular interest in Francistown Radio. I hope, however, that on independence the station will close down. It may be that when the time comes for the Commonwealth Secretary to move to another place, he may decide to take the title of Lord Bottomley of Botswana and thus emphasise for posterity his interest in the Francistown Radio. I assure the Minister, however, that this radio station will cause difficulties in Southern Africa after the independence of Botswana. I am sure that the House would like to know what Her Majesty's Government contemplate doing about this station after Botswana has become independent.
Then again, there is the question of the rail link, which was also referred to by my lion. Friend the Member for Worcestershire, South. He said that there was

a lot of oil going from South Africa to Rhodesia along that route. I think that I am right in saying that the Parliamentary Secretary shook his head at that. May I say to him that on my recent visit to Mozambique, the Portuguese authorities said to me, "Your Government are always complaining that we are sending oil to Rhodesia, but we can tell you that, if we are sending anything, it is nothing compared with what is going through Bechuanaland, which you are supposed to control. Why are you such hypocrites?" That is what the Portuguese feel, rightly or wrongly. I hope that we can have a reply on this matter.
In conclusion, the message which I should like to send from the House to Botswana is, "Good luck. May you show that an independent African nation can live in peace and friendship with South Africa and with an independent Rhodesia. If you can achieve that, you may well change the course of Africa's history."

2.10 a.m.

Mr. Frederick Lee: It was not unnatural in a discussion of this type that we should go well outside the content of the Bill which we are discussing, especially as we do not get all that much chance to discuss the problems associated with the Colonies these days. For my part, I do not complain in the least, and I should have been surprised if we had not gone rather wide in our discussions.
I would make the point, however, that practically all the problems which have been canvassed during the debate are such that solutions to them are not to be found merely in the granting of independence. They are problems which have been there for many years, and we are all painfully aware of them. No matter how good the administration may have been, it has not been able to eliminate the problems which many right hon. and hon. Gentlemen have been discussing. Nor do I think it possible, within the content of a constitution, that one can necessarily solve them all overnight.
If I might try to answer some of the points which have been raised in the course of the debate, the question of the station at Francistown was raised by the hon. Member for Haltemprice t Mr. Wall) and by one or two other hon. Members. The future of that station was


discussed with Seretse Khama on its recent visit, and agreement was reached on its continuance over the independence period. I was also asked about the guard on the station. At present, it is being guarded by a company of British troops from the battalion in Swaziland. That is as far as one can go in answering the point about that.

Sir D. Glover: Will they remain there after independence?

Mr. Lee: These discussions took place with Seretse Khama on his recent visit, and it was agreed that it would stay into independence.
Right hon. and hon. Gentlemen on both sides feel as I do in these matters, that we are not managing to do enough in aid for territories of this sort. But I must remind the House about how our payments have been going. In 1963, our total was £163 million; in 1964, it was £195 million; in 1965, it was £197 million; and in 1966, it is £225 million. It is not a mean or inconsiderable amount that the nation is raising and making available to our friends overseas.
I said what I had to say in the last debate on the question of the wider reach of aid and about the great many countries which could afford to do something in this respect instead of leaving it to others. I think that this is a great tragedy for the future of these territories.
Questions were asked about the Porter Report which my right hon. Friend the Minister for Overseas Development had commissioned. My right hon. Friend is not refusing to publish the report. It was made to the Bechuanaland Government, and the question of publication is now under discussion between my right hon. Friend and the Government of Bechuanaland. It is therefore not the case that there has been a refusal to publish the report.
Mention was made of the customs union. There have been negotiations about this. Two of the three territories were not satisfied that they were getting their fair share, and the Bechuanaland Government's share of the total sum available has been increased. It is true that the total for division has not been increased as a result of Mr. Lewes's review. There has been a re-allocation of

the total. Swaziland and Bechuanaland get a larger share, and Basutoland gets a smaller share of the sum total.

Mr. Lubbock: This is the point that 1 made. Mr. Lewes was not asked to consider the total figure. What is the right hon. Gentleman going to do about that before these countries reach independence?

Mr. Lee: I understand that there will be negotiations, and I think that they prefer to do this after independence rather than now. Mr. Lewes was asked to look at the allocation of the sums because there was a failure to get agreement between the three territories.
Reference has been made to the railway. We have figures which I do not want to give to the House. It may be that I shall be asked Questions in the course of the next few days, when I can go into more detail. The hon. Member for Worcestershire, South (Sir G. Nabarro) said that the vast majority of the oil was going down this railway. This is not true.

Sir D. Glover: My hon. Friend is not here. He said that more was going by that route than was coming from Mozambique.

Mr. Lee: I deny that. It is nothing like the same amount. 1 do not deny that some is coming down, but I do not think that there is any point in exaggerating. I deny that more is going up that route than by one or two of the other routes.
I was asked again about the financial talks which have been going on between my right hon. Friend and representatives of the Bechuanaland Government. My hon. Friend gave a number of figures to show what is being done to assist the Bechuanaland Government, and I do not want to go over them again. We have undertaken to inform the Bechuanaland Government next month of the scale and nature of the financial contribution that we can make towards her needs after March 1967. In the meantime, to assist Bechuanaland to meet its immediate needs, the British Government have agreed to make available between the date of independence and 31st March, 1967, the unspent balance of Bechuanaland's current grant allocation of Commonwealth Development and Welfare


funds, together with the unissued balance of budgetary grant already agreed for the financial year 1966–67. The necessary Supplementary Estimates will be laid before Parliament in due course. In the meantime, advances will be sought from the Civil Contingency Fund if necessary.
British technical assistance will continue to be available to Bechuanaland after independence, and we are also making loans to implement Bechuanaland's share of the payments to officers of the Overseas Civil Service under the general compensation scheme agreed during the constitutional talks held in London in February of this year.

Mr. Wall: The right hon. Gentleman will recall that my hon. Friend the Member for Worcestershire, South estimated that there would be an increasing deficit on the budget from the present £1.9 million to about £4 million in the future. Does the right hon. Gentleman accept that this deficit will increase, and does he envisage Her Majesty's Government meeting this deficit in the years to come?

Mr. Lee: These discussions have been going on. I cannot go beyond what I have said in my statement tonight. We are not unaware of the problems and, given our own problems, we understand the grave difficulties of this matter.
The hon. Member for Ormskirk (Sir D. Glover) was concerned about the problem of the bushmen. I understand that a trained anthropologist was commissioned to consider the welfare of these people a year ago. That gentleman made a survey. A copy of his report was published last year and is now in the Library of the House. Responsibility for the bushmen's affairs has now been placed within the portfolio of the Deputy Prime Minister, and the extent to which the Bechuanaland Government will be able to devote funds especially to assist the bushmen themselves will depend upon other competing demands. We do not see any reason to suppose that they will not be treated by the Botswana Government with understanding and sympathy. These bushmen are dependent to a large degree upon the food they obtain from their own hunting. I understand that the game reserve which was established a few years ago to safeguard their hunting interests will be continued under the new dispensation, and

there is a fundamental rights provision in the existing constitution which will be carried on into the new constitution.
I hope that these provisions will assist the hon. Member in his worthy efforts to see that they are not forgotten in the new dispensation.

Sir D. Glover: What the right hon. Gentleman has said is completely and utterly unsatisfactory. He has said that there is a book in the Library. Everybody knows that there is a book in the Library, but that does not solve the problem. What are the Brtish Government doing to protect the rights of the bushmen before they hand over independence? They will not get a square deal if the Bantu have anything to do with it.

Mr. Lee: I have indicated the global figure which we are making available. The Government of Botswana will have to determine their priorities, within which the bushmen's problems will come fairly high. We cannot subdivide this aid. It would make nonsense of the whole basis of our aid if we were to say, The priorities which you must observe as a condition of getting aid are A, B, C and D." The hon. Member has this point at heart. I do not doubt that each of us, if asked to determine priorities in this respect, would decide differently, and my priorities would probably be of secondary consideration to the hon. Member.
A point was made about minerals. Small quantities of manganese and asbestos are being mined. Examinations are now taking place on the possibility of exploiting copper deposits, but it is early to say whether this will be on a substantial scale. However, pronounced efforts are being made in that respect.
I have tried to answer as many as possible of the questions that I have been asked. I join with the right hon. Gentleman and his hon. Friends, and with my hon. Friends, in the good wishes they have expressed towards Botswana. I want to associate myself with those who have spoken so highly of the qualities of Seretse Khama, and of his great courage. Where there is very little economic security, it is remarkable that Seretse has been able to help his people to outstanding political stability. This has been accomplished in the most difficult circumstances imaginable.
In asking the House to agree to the Second Reading, I am sure that I can, on behalf of all in the House, express our congratulations and appreciation to Seretse Khama and his colleagues and wish them the very best for the future.

Hon. Members: Hear, hear.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Charles R. Morris.]

Committee this day.

LAW REFORM (MISCELLANEOUS PROVISIONS) (SCOTLAND) BILL

Lords Amendment considered.

Clause 6.—(AMENDMENT OF S. 5 OF TRUSTS (SCOTLAND) ACT 1961.)

Lords Amendment: In page 4, line 25, leave out subsection (2) and insert:
(2) The restrictions imposed by the said section 5 shall apply in relation to a power to accumulate income whether or not there is a duty to exercise that power, and they shall apply whether or not the power to accumulate extends to income produced by the investment of income previously accumulated.

2.25 a.m.

The Minister of State, Scottish Office (Mr. George Willis): I beg to move, That this House doth agree with the Lords in the said Amendment.
The effect of the Amendment is that accumulations under Section 5 of the Trusts (Scotland) Act, 1961 the so-called Thellusson restrictions-shall apply not only where the relevant deed specifically directs accumulation, but also where it merely permits it. It follows a similar provision for England and Wales in Section 13(2) of the Perpetuities and Accumulations Act, 1964.
A provision to the same effect was included in the earlier Bill which was before Parliament earlier this year. On the Second Reading in another place, however, the noble and learned Lord, Lord Guest, expressed misgivings about it and it and suggested that the provision should be dropped until some such body as the Scottish Law Commission had considered it. This course was adopted. The hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) subsequently expressed doubts about whether Lord Guest's doubts were well-founded, but agreed to await the Scottish Law Commission's consideration.
On Report stage of the Bill, I informed the House the Law Commission's advice had just been received and that we hoped to finalise consideration of this matter and take the necessary action by way of Amendment in another place. This resulted in this Amendment, which gives effect to the advice of the Law Commission. The advice was, briefly, in favour of the provision. There should not, they considered, be serious difficulties for charitable trusts, since the


restrictions do not strike at their holding income, as undistributed income, for distribution the following year. What the Statute strikes at is accumulation, that is, rolling up income to form a capital fund.
The Commission went on to say that the absence of the provision against permissive accumulation, particularly in contrast with the corresponding English Statute, would be an encouragement to evasion of the law against accumulation. Deeds would be framed with a power to accumulate, not a direction, but the settler would give an indication of his wishes which would doubtless be acted upon.
With regard to the state of the existing law, which was another matter which Lord Guest raised, the Commission gave it as their view that there are indications—but no more—that discretion to accumulate would probably be interpreted as falling within the operation of the Thellusson Statutes. In view of the fact, however, that the Commission conclude that the existing law is in some doubt. we have thought it desirable to leave existing rights undisturbed, but to clarify the position for the future. The Amendment achieves this.

2.30 a.m.

Mr. N. R. Wylie: The Amendment is welcomed by my hon. Friends. It relates to a highly technical sphere of trust law which has followed parallel courses in England and Scotland since 1800.
In the original draft that parallel course was observed. As the Minister of State said, doubts were raised in another place at earlier stages of this Measure's predecessor in the last Parliament, and the Bill rather went off the rails. However, it seems to be back on the rails and we are now in line with Section 13 of the Perpetuities and Accumulations Act, 1964, which applies to England and, in this sphere of the law which dates back more than 150 years, it is obviously desirable that the law in both countries should he the same. I had expressed doubts on the matter, when the Measure was originally drafted, and I very much welcome the Amendment.

Question put and agreed to.

OVERSEAS AID BILL

Lords Amendments considered.

Clause 1.—(POWER OF MINISTER OF OVERSEAS DEVELOPMENT TO PROVIDE ASSISTANCE TO, OR FOR THE BENEFIT OF, OVERSEAS COUNTRIES.)

Lords Amendment: In page 2, line 25, leave out from "the" to "established" and insert:
governments of the Federation of South Arabia, Aden, the Island of Perim, the Kuria Muria Islands and Kamaran, and any government (other than that of the said Federation)".

Motion made, and Question proposed, That this House doth agree with the Lords in the said Amendment.

2.31 a.m.

The Parliamentary Secretary to the Ministry of Overseas Development (Mr. Albert E. Oram): On Report in this House the right hon. Member for Bridlington (Mr. Wood) pointed to the need, as he saw it, to make specific reference to the Federal Government of South Arabia. My right hon. Friend undertook to consider the matter and to take, in another place, any action that might prove desirable. The Amendment is the outcome of my right hon. Friend's undertaking.

Mr. Richard Wood: As the Parliamentary Secretary pointed out, an attempt was made on Report to vary the wording of the Clause as it stood. For the record, it should be said that his right hon. Friend thought on that occasion that, as drafted, the wording was appropriate in the circumstances. As far as I remember, he was not at that time very impressed by the powerful argument which I adduced.
However, others felt otherwise, and I hope that those in the Federation who felt strongly about this, as I know they did, took the opportunity to put their views before the right hon. Gentleman, and I am grateful to the Minister for the courteous letter I received from him subsequently, in which he stated that he had changed his mind and intended to table an Amendment in another place.
I hope that I will not be ruled out of order if I ask some hon. Gentlemen opposite who are rather anxious to abolish' another place to remember that


it does occasionally perform a very useful function in correcting Ministers' mistakes.

Question put and agreed to. [Special Entry.]

Clause 2.—(FINANCIAL PROVISIONS FOR GIVING EFFECT TO AGREEMENT ESTABLISHING ASIAN DEVELOPMENT BANK.)

Lords Amendment: In page 4, line 18, leave out "respects" and insert "represents".

Motion made, and Question proposed, That this House doth agree with the Lords in the said Amendment.

Mr. Oram: This is a purely drafting Amendment.

Question put and agreed to.

MINISTRY OF SOCIAL SECURITY BILL

Lords Amendments considered.

Clause 33.—(LEGAL PROCEEDINGS.)

Lords Amendment: In page 16, line 34, after "knowledge" insert:
or within the period of twelve months from the commission of the offence, whichever period last expires".

2.35 a.m.

The Minister of Pensions and National Insurance (Miss Margaret Herbison): I beg to move, That this House doth agree with the Lords in the said Amendment.
This is the first of four Amendments made to the Bill in another place. They are all minor and technical Amendments, so that we should not detain the House long. The Amendment brings the time limits on the commencement of legal proceedings in Scotland, under Clause 33(5), into line with the time limits for England and Wales, which are specified in Clause 33(3)(6). It is desirable that the time limits should be same in all these countries.
The Amendment was brought to our notice by one of my predecessors, Lord Drumalbyn. The intention was always that the time limit should be the same, and I am sure that will be acceptable.

Question put and agreed to.

Subsequent Lords Amendments agreed to.

Schedule 2.—(PROVISIONS FOR DETERMINING RIGHT TO AND AMOUNT OF BENEFIT.)

Lords Amendment: In page 21, line 9, at end insert:
(3) Where the person claiming or in receipt of benefit is entitled to such other payments as may be specified for the purposes of this paragraph by regulations made by the Minister, the preceding provisions of this paragraph shall, in such circumstances as may be specified in the regulations, have effect as if sub-paragraph (1) were omitted and for the references in sub-paragraph (2) to the amount of any benefit there were substituted references to the aggregate of that amount and of the amount of the payments so specified.

Miss Herbison: I beg to move, That this House doth agree with the Lords in the said Amendment.
The effect of the Amendment is that where a person is entitled both to noncontributory benefit and some other payment specified by the Minister, regulations may provide that it is the aggregate of the two payments which is to be rounded to the nearest Is. and not simply the non-contributory benefit itself.
Where this rule is applied, paragraph 2(1) of the Schedule, which prescribes that the minimum payment is to be 2s., will not now apply. This is simply because the situation in which the total of non-contributory benefit and another payment amounted to less than 2s. could not arise. The Amendment is necessary to meet the situation that will arise where a combined payment is made of non-contributory benefit and some other benefit, for example, in the immediate future, unemployment benefit.
Unless the total of the two payments is rounded, the situation could arise in which, solely on account of a change in the rate of unemployment benefit and where there had been no change in the individual's circumstances, his total payment from the two benefits went up or down by sixpence. This would be an unsatisfactory state of affairs, and the Amendment gets rid of that.

Miss Mervyn Pike: These are small technical Amendments, but we welcome them, particularly this one. It goes some way towards meeting the point we raised in Committee. We have not been able to have any of our Amendments accepted, but we welcome this


small step forward towards what we wanted.

Question put and agreed to. [Special Entry.]

IRON AND STEEL [MONEY]

Resolution reported,

That, for the purposes of any Act of the present Session to provide for the establishment of a National Steel Corporation and the transfer thereto of the securities of certain companies engaged in the production of steel (hereinafter referred to as "the Act") it is expedient—

(1) to authorise the charge on the Consolidated Fund or the issue thereout of—

(a) the principal of, and interest on, stock to be issued under provisions of the Act for making compensation for the vesting there under of securities of companies and other property and of rights;
(b) any sums required by the Treasury to enable them to pay interest on the amount of any compensation for the vesting under the Act of property (other than securities) or of rights in respect of the period from the vesting of the property of rights until the date of payment of the compensation;
(c) such sums as are necessary to enable the Minister of Power (hereinafter referred to as "the Minister") to lend money to the said Corporation;
(d) any sums required by the Treasury for fulfilling any guarantee given by them for the repayment of the principal of, or the payment of interest on, sums borrowed by the said Corporation from a person other than the Minister;
(e) expenses in connection with the issue, repayment or management of stock issued as aforesaid;

(2) to authorise the Treasury, for the purpose of providing sums to be issued out of the Consolidated Fund for the purpose referred to in paragraph (1)(c) above, of providing for the replacement of sums so issued, or of providing sums required to redeem stock issued as mentioned in paragraph (1)(a) above, to raise money in any manner in which they are authorised to raise money under the National Loans Act 1939;

(3) to authorise the payment into the Exchequer of any sums received—

(a) by the Minister, by way of interest on. or repayment of, the debt which under the provisions of the Act is to be assumed by the said Corporation to him or sums lent to them by him;

(b) by the Treasury, by way of interest on, or repayment of, any sums paid by them in fulfilment of any such guarantee as is mentioned in paragraph (1)(d) above;
(c) by the Minister, by way of repayment by the said Corporation of sums paid by him by way of such remuneration, allowances or expenses as are mentioned in paragraph (4)(a)(ii) or (iii) below;
and the issue out of the Consolidated Fund of sums paid into the Exchequer representing such interest or repayment as is mentioned in sub-paragraph (a) of this paragraph and the application of sums so issued in redemption or repayment of debt, or, in so far as they represent interest, towards meeting such part of the annual charges for the National Debt as represents interest;

(4) to authorise the payment out of moneys provided by Parliament of—

(a) such sums as are requisite to enable the Minister to pay—

(i) allowances to the members of the Iron and Steel Consumers' Council to be re-established by virtue of the Act and of any committee of that Council, remuneration and allowances to the clerks, officers and staff of that Council and expenses of that Council and of any committee thereof;
(ii) remuneration and allowances to, and expenses incurred by, stockholders' representatives to be appointed by virtue of the Act;
(iii) remuneration and allowances to members and officers of the Iron and Steel Arbitration Tribunal to be re-established by virtue of the Act and persons to whom proceedings are referred by that Tribunal for inquiry and report and other expenses of that Tribunal;
(b) any increase attributable to provisions of the Act in the sums which, under section 12(3) of the Industrial Training Act 1964, as amended by the Redundancy Payments Act 1965, are defrayed out of moneys so provided;
(c) any administrative expenses of the Minister incurred for the purposes of the Act or the provisions thereby revived of the Iron and Steel Act 1949.

Resolution agreed to.

POLICE (SCOTLAND)

Order for Second Reading read.

Bill referred to the Scottish Grand Committee.—[Mr. Willis.]

HOSPITALS SERVICE, EAST MANCHESTER

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Walter Harrison.]

2.40 a.m.

Mr. Will Griffiths: The subject I am raising this morning is particularly appropriate at the end of a sitting which began with a debate on the state of the nation's economy.
When winding-up that debate my right hon. Friend the President of the Board of Trade drew attention, quite rightly, to the Government's decision to exclude from the economy measures investment in housing, schools, education and hospitals, and he said—I noted his words down—that in those fields there were "new and greater priorities". We shall see. I shall speak now of the hospital requirements of an important number of Manchester citizens, and, though I speak of Manchester, I recognise at once that this is simply a national problem in microcosm.
On page 62 of the Hospital Building Programme, published in May this year, we find a review of the Manchester hospital region, and this is said:
The main problem in the region is that most of the existing hospitals have their origins in the industrial revolution",
and then, visualising the future, it is said in the same paragraph:
Accordingly the programme will be mainly one of phased rebuilding of major hospitals either on their existing or new sites.
I appreciate that the situation described there in the Hospital Building Programme is typical of most of our industrial areas and it is not exclusive to Manchester. As regards hospital building, it is a sad story that the nation has had to tell since the war. When Galbraith used the phrase "private affluence and public squalor", he could have found here in Great Britain plenty of evidence of public squalor in our hospitals. I never cease to wonder at the noble work which is being done by people employed in the hospital service in surroundings which are a disgrace for both the professional workers and for the patients who have to attend hospital.
I come now to East Manchester and my own constituency, and at this point I shall recite a few facts with which I hope the Parliamentary Secretary will be able to agree. There are in Manchester three hospital management committees outside the teaching group, the West, North and South Hospital Management Committees. In the present structure of the service in the City of Manchester, there is no specifically eastern group. Taking East Manchester as including those suburbs of the city such as Beswick, New Cross, Gorton, Openshaw and parts of Ardwick, we have here a segment of the population of Manchester amounting at present to about 145,000.
In this area, there is only one hospital, the Ancoats Hospital, as my hon. Friend the Member for Openshaw (Mr. Charles R. Morris), whom I am glad to see here tonight, will know. Going north from Ancoats, one does not find another one until reaching the Northern Hospital. To the south, there is the teaching group under the control of Manchester United Hospitals. To the west, one goes into the City of Salford, with its Salford Royal Hospital, and to the east one goes to the Borough of Ashton, with the Ashton-under-Lyne General Hospital.
The Ancoats Hospital is situated in a highly industrialised area surrounded by a commercial and business section, very near to the centre of the City, but around it there is a considerable area of residential property and, what is more important, there are great areas—which will grow—of residential urban renewal. At present, I am told, this hospital treats approximately 1,000 casualties a week.
The future of this hospital has been considered by the regional hospital board on a number of occasions in recent years and from the board had come a stream of plans of varying quality and dimensions which have been widely publicised in the Press in the city. Because we have only a short debate, I will not go too far back, but will start to recite the history of the hospital from 1962. In July of that year the regional hospital board asked the Manchester City Council Planning Committee to reserve for future hospital development 15 acres. The corporation, after consultation with the board, agreed to reserve nine acres and that reservation remains today. It is still there if the regional hospital board


wants to proceed, as I hope it will, with extensive developments of Ancoats.
In February, 1963, the chairman of the regional hospital board planning committee said of Ancoats:
We shall extend upwards and outwards".
This observation was publicised in the city at the time and taken by almost everyone to mean extensions to the existing building and virtually the construction of a new hospital in the same area. The board confirmed to me its intention to redevelop Ancoats along these lines.
As the Parliamentary Secretary knows, all this has been dropped and today all that is planned for Ancoats is a new outpatients' department and improvements to the accident department. Goodness knows, it is modest and certainly urgent, but even this, as I understand, is now in the far distant future.
In March, 1965, the regional board wrote to a colleague who is an alderman on the Manchester City Council and said that the board hoped to start work on this limited project in 1967–68, but that it was now clear that it was not to begin before 1968–69. The Parliamentary Secretary to the Ministry of Health wrote to me in May, 1965, only two months later, and said that it had been originally intended to begin this work in 1967, but that events had arisen which compelled a postponement for one year. That is approximately the same story as that given by the board to my colleague on the city council. As the Parliamentary Secretary will recall, he went on to say:
It remains high on the priority list".
The pattern of development in the Hospital Plan published in May this year, from page 62 onwards, shows a list of projects which it was hoped to begin in the Manchester region. It shows schemes which it is hoped to start in the period up to 1969–70 and it does not include the development of Ancoats Hospital despite the fact that in March the regional board was saying that it was to start in 1968 and that in May the Ministry was saying the same thing.
Indeed, when we look further in this revision of the Hospital Plan, it is not until after 1969–70 that we find Ancoats mentioned again. under a sentence that reads:
According to present plans, the start of these schemes"—

that is, the schemes to be commenced in the period up to 1969–70—
will be followed by the start of …
and against we find Ancoats mentioned.
It is a disappointing story, and I do not think that it is explicable wholly in terms of a deteriorating financial position. There seems to be a lack of clear understanding on the part of the regional hospital board as to what it wants in a new general hospital for this area, and where it wants it.
Because I am sure that the House wants to hear what my hon. Friend has to say, and because I do not want to take up any more time, I sum up what I. have had to say in this way. On the evidence of the attitude taken by the regional hospital board, of my hon. Friend in his communications to me, of the Answer which the Minister gave to me in the House a week or two ago, and of the hospital building programme published in May of this year—on all the evidence from those sources there is no doubt that the needs of East Manchester are recognised.
Secondly, there are existing buildings at the Ancoats Hospital and, most importantly, there is an extremely valuable and large enough site. Thirdly, planning permission has already been granted some years ago—acceding to the request of the hospital board—by the Manchester City Council. I must point out, however, that as the tempo of Manchester urban renewal increases there is no guarantee that the site can remain undeveloped for ever. As I say, it is an extremely valuable site.
I therefore beg my hon. Friend the Parliamentary Secretary to ask the regional board to look at all this again. I understand perfectly well that a feasability project is now under consideration for the development of the teaching hospitals of Manchester. That, I welcome very much, because that is also in my constituency, but on the basis of the story I have put to the House, I ask my hon. Friend at the very least to ask the board to examine the subject again, and to see whether, first, the essential minor works at Ancoats can be carried out more speedily than is at present envisaged and, secondly, to consider whether the whole site could not be, as was said by the chairman of the planning committee a


few years ago, developed both upwards and outwards as a new general hospital.

2.52 a.m.

The Parliamentary Secretary to the Ministry of Health (Mr. Charles Loughlin): My hon. Friend the Member for Manchester, Exchange (Mr. Will Griffiths) has spoken with his usual eloquence and force about the problems of the hospital service in East Manchester, and particularly about the future of Ancoats Hospital. Before deal with the points he has raised—and by the time I sit down I hope to have dealt with most of them—I should like to say a few words about the considerations that must govern planning in a great urban area like Greater Manchester.
In such an area it is particularly difficult to say which hospitals serve which parts. There are really no hard-and-fast boundaries, communications in general are fairly good and, further, near the centre of the area, there is a group of teaching hospitals, including the well-known Manchester Royal Infirmary, to which patients come from all over the area. Again, broadly, there are, and will continue to be, substantial internal movements of population as slum clearance and rehousing proceed.
I know that my hon. Friend will agree that the Manchester of 20 years' hence will present a very different picture from that of today and a very different picture from that of yesterday, whose needs most of the existing hospitals were built to serve. I submit to him that the lesson of this is that it would be bad planning to plan for one part of the area without taking into consideration developments in the area as a whole.
At present, hospital services for patients from East Manchester are provided by the hospitals of the North Manchester Group; that is, by the Crumpsall, Northern, Victoria Memorial Jewish, and Ancoats Hospitals, as well as the Beech Mount Maternity Home. Many patients from this area, however, are treated at the teaching hospital. Child patients are treated at the Royal Manchester Children's Hospital and the Booth Hall Hospital, and patients requiring some highly specialised treatments will receive them at hospitals elsewhere where regional or sub-regional centres exist. On

the other hand, the North Manchester Group of hospitals admits patients from outside the city, from the central and southern parts of the city, and, in the specialties of neuro-surgery, urology and psychiatry, from an even wider area.
I have said that when the services to be provided in East Manchester are viewed in the wider perspective, developments taking place in other parts of the area must be considered. In the south, at Wythenshawe, a new district general hospital is currently being built and the maternity department is already open. Withington Hospital is in process of redevelopment and extension. An entirely new district general hospital is to be built at Cheadle. To the south-east, Stepping Hill Hospital, in Stockport, is to be rebuilt and extended.
Extensive hospital developments are planned in Salford and district towards the west and north-west of the area and similarly on the periphery developments will take place at Oldham and Ashton-under-Lyne, to the east of Manchester. At the centre, it will be necessary to provide a new and larger teaching hospital to replace the old and unsatisfactory existing buildings. This new teaching hospital will serve as a district general hospital and it seems reasonable to assume that it will be used by many patients from East Manchester, particularly as, with new or redeveloped hospitals to the south of Manchester from which many of its patients now come, it will have increased capacity. The new teaching hospital will be only 11-miles from Ancoats Hospital.
My hon. Friend will, I hope, agree that in these circumstances the planning of the future of the hospital service for East Manchester is a matter of some complexity. The effect of the peripheral hospital developments to which I lave referred cannot be measured for some years yet and there is a real danger that if decisions are taken now which fail to have regard to them, there is more than a possibility that hospital provision will be made on the wrong scale and, possibly, even in the wrong place.
As I have said, there will continue to be internal movements of the population of the area as a whole and plans for improving the road network could change the whole pattern of communications.


All this points to the wisdom of postponing final decisions about the future hospital service in East Manchester as long as is reasonably possible.
It should be possible to form a preliminary judgment of the likely effects of all these developments—at least of their effects on the hospital maternity services in the area—in the fairly near future. The new maternity units at Wythenshawe and Withington are already beginning to show their effect on the load on the existing St. Mary's Hospital and although these are early days it seems at least possible that the new and enlarged St. Mary's Hospital which is now being built will have an increased capacity to accommodate mothers from the East Manchester area, to which my hon. Friend referred. But it will be some years before a firm conclusion will be possible.
My hon. Friend will not, I hope, draw the conclusion that the needs of East Manchester are being ignored or given a low priority merely to facilitate planning. They have been most carefully considered both by the regional hospital board and my Department. An essential part of the revision of the Hospital Plan for England and Wales, which has just been completed, was, of course, a check on the priority being given to the provision planned for each area.
The Manchester Regional Hospital Board has many claims on its resources and we are satisfied that, in giving high priority not only to those developments in the Greater Manchester area to which I have referred but also, for example, to developments in the Blackpool, Blackburn and Preston area, all of which have far more pressing problems than East Manchester, it has made the right decision.

Mr. Will Griffiths: What has happened in the board to make it change its view of planning between 1963 and now?

Mr. Loughlin: The planning of the whole of the service for Manchester has been a continuous process. I will come a little later to the particular case of the Ancoats Hospital. I must emphasise that the current needs of East Manchester are not being forgotten. A scheme for a new outpatients and accident department at Ancoats Hospital which was not on in

the original Hospital Plan is now listed in Command Paper No. 3000. It enjoys a much higher priority than many schemes listed in the original plan. It is true that I cannot say now the date on which this development will commence; but I can tell my hon. Friend that it is under active consideration at the moment.
In the whole of our approach to these plans on this occasion, we have attempted, as far as possible, not merely to give a high degree of flexibility, so that there are not any particular dates on listed projects, but we have also said that, even where we may give a list of projects which should or might be finished at given dates, it has to be recognised that a degree of flexibility even in this aspect has to be accepted and that some will be brought forward while others may be put back.
In addition, major developments are planned at Crumpsall Hospital to improve the existing services there, mainly to upgrade the maternity unit and provide ante-natal facilities. Pending the permanent redevelopment of the service for the area, there is reason to hope that the existing hopsitals can be relieved of some pressure by the United Manchester Hospitals, as pressure on them is relieved by other peripheral developments.
It is clear that Ancoats Hospital must continue for some time to come at least but, for the reasons I have given, it is not necessary now to conic to a final decision on its permanent future or on the future pattern of the hospital service for East Manchester. We have said in Command Paper No. 3000 that, in the long term, North and East Manchester will require two district general hospitals, but what we will not be able to say for some time yet is what their size will be.
My hon. Friend has rightly raised very sharply the question of Ancoats Hospital and I agree with him that the hospital has a very high reputation. It is well known to us and we are all well aware that this reputation does not stem from the buildings, which leave very much to be desired, as he rightly said, but from the successful efforts of the medical, nursing and other staff to overcome difficulties imposed upon them by the inadequacies of old buildings unsuited to the needs of modern medicine.
I would like to echo the praise for the devotion of the staff, particularly in the


light of the pressures under which they are working at present. Yet, however sympathetic we are to the conditions, we cannot ignore the fact that the life of the existing premises is limited. The ward units are old and lacking in ancillary accommodation. It may be that it would be possible to build "high and wide", as my hon. Friend suggests, but there are difficulties in that.

Mr. Will Griffiths: As the hospital board says.

Mr. Loughlin: As the chairman of the regional board's planning committee says.
The whole point here is that there is a site of three acres, with the prospect of an additional six acres, and not nine as has been said, but making nine acres in all, on which it is assumed that we can build a major district hospital. Speaking "off the cuff", I think that it is accepted that we normally require about 30 acres for a 600 to 700-bedded hospital with the accompanying services. If we require 30 acres for this type of hospital when we have only nine acres, then obviously the height to which we would need to build the hospital would present difficulties; not only in respect of the height itself, but in terms of engineering, ventilation, and heating; and in all, it would be a very expensive unit indeed.
So, even if the chairman of the regional board's planning committee says that this site could be developed for a major hospital, I would hesitate before agreeing to develop a limited site of this kind for a major hospital. We cannot commit ourselves at this stage as to whether Ancoats will be part of the ultimate hospital pattern serving East Manchester, and it is clear that the maximum amount of land we can get to extend the site will not permit the building of a comprehensive district general hospital. But despite these limitation, it is at present an essential part of the hospital services in this area and I think it is true to say it will remain so for some years yet.
I hope, therefore, that we can put into effect the greatly improved facilities for dealing with the out-patients and the accident cases. I am sorry that I cannot tell my hon. Friend the precise date when we hope to have the accident and emergency departments fully in operation, but I give the definite assurance—

The Question having been proposed after Ten o'clock on Tuesday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at ten minutes past Three o'clock a.m.